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IRS tests free e-filing system that could compete with tax prep giants

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Re: IRS tests free e-filing system that could compete with tax prep giants

#331

Post by frumper »

az226 wrote: post #166
_yb2s wrote: post #51

Earlier quoted context omitted.

The weird thing is the IRS already knows my taxes better than I do… a few times I’ve made mistakes inputting forms or forgot to put something in, and I will always get a letter from them about it. They’ve already done my taxes so they should just send me a bill and not waste my time, possibly with the option to submit extra details they are missing like deductions… but that should be an option for people that need it…

Exactly. “We’ve submitted your tax return for you using the standard deduction. If you’d like to itemize your deduction, please send us Form 1050 Itemized Deduction worksheet.”

Even taking the standard deduction, I don't think I've had a year in my life where I didn't have additional tax credits and deductions. You don't need to itemize for some very common situations on top of the standard deduction.

Re: IRS tests free e-filing system that could compete with tax prep giants

#333

Post by frumper »

alistairSH wrote: post #254
pclmulqdq wrote: post #249

Earlier quoted context omitted.

That's not really true. Itemized deductions are a small part of this, and so are the individual tax credits. Business accounting and post-tax investment are actually the big items here, and are impossible for the IRS to do for you. I'm afraid that if you get a stock grant from your employer, that puts you beyond where the IRS can send you a pre-filled form that is correct.

I'm afraid that if you get a stock grant from your employer, that puts you beyond where the IRS can send you a pre-filled form that is correct. Sure, but that's a tiny fraction of the population. Nobody is saying the IRS should send you a fixed return. Only that they should send what they have, and if nothing needs changed, great, society is better off.

Lots of deductions and credits are on top of the standard deduction. School expenses, child credits, child care expenses, retirement savings, EIC credits and student loan interest are some very common things.

Re: IRS tests free e-filing system that could compete with tax prep giants

#334

Post by bluGill »

JohnFen wrote: post #305
bluGill wrote: post #131

Earlier quoted context omitted.

The tax industry goes out of their way to make it seem harder than it is to justify their existence. You can do the forms by hand (not even a calculator) faster than most tax software - most of that time is added delays to make it seem like the computer has to work hard to do something hard. Unfortunately if you do things by hand you will eventually make a trivial mistake and the IRS will get mad about that.

> the IRS will get mad about that. In my experience, the IRS won't get mad about that. They'll ask you to correct it, of course. What makes the IRS mad is if it looks like you're actively trying to illegally avoid taxes. Also, in my experience, the IRS are generally decent to work with. My state revenue department, however, is the opposite of the IRS in every way. They're just mean and vindictive.

If you mess up you have to then correct the state.

Re: IRS tests free e-filing system that could compete with tax prep giants

#335

Post by frumper »

jdeibele wrote: post #217
jrochkind1 wrote: post #146

Earlier quoted context omitted.

I forgot the standard deduction went up a lot. I think you can still easily reach if you, say, tithe 5 or 10% of your (post-tax even!) income (to a church or other 501-c-3) and have a mortgage and pay property taxes in a major metropolitan area. (Also if you're single the standard deduction is half married filing jointly.) (I didn't realize the personal exemption is gone now too!!) But a quick google says... accordin…

I don't know if they have but charities (nonprofits and churches) lobbied against increasing the standard deduction or to make an exception for charities. Which didn't happen. https://www.philanthropy.com/article/nonprofits-hunt-for-a-t... I guess there was a $300 provision for charitable deductions enacted in 2020 that they are trying to make permanent and larger. Web site wasn't working for me but Google's cache di…

The cash donations on top of the standard deductions phased out this year. This year, as far as I could tell, only way to deduct cash donations was itemizing.\

https://www.nerdwallet.com/article/taxes/tax-deductible-dona...

Re: IRS tests free e-filing system that could compete with tax prep giants

#336

Post by [deleted] »

lr1970 wrote: post #210
shortcake27 wrote: post #184

Earlier quoted context omitted.

Yeah the American system absurd. “We have all the data but you still need to figure it out yourself and if you get it wrong you’ll get in trouble”. The Australian system has improved a lot over the past few years - PAYG (employment), bank interest, and dividends are all pre-filled on your tax return. So all you need to figure out is deductions and other income. I’d still like to see it taken a step further like in th…

> Yeah the American system absurd. “We have all the data but you still need to figure it out yourself and if you get it wrong you’ll get in trouble”. IRS knows all the income data only in simple cases like salaried employees with W-2 forms. If you are business owner or contractor the things can be more complicated and what IRS really knows is a guessing game. IRS is posturing and bluffing that they know everything an…

[deleted]

Re: IRS tests free e-filing system that could compete with tax prep giants

#337

Post by tcmart14 »

jghn wrote: post #239
rapht wrote: post #224

Earlier quoted context omitted.

> IRS knows all the income data only in simple cases like salaried employees with W-2 forms. If you are business owner or contractor the things can be more complicated If you already can avoid the trouble for 50% (?) of the people who are in the standard case, it's already a massive win.

Exactly. Doing custom taxes could be opt-in. "Here's what we're going to charge you. If you think you owe less due to details we don't have, feel free to file the old way"

Isn't this what some of the nordic countries do? They send you have receipt/bill and you have a window to correct it.

Re: IRS tests free e-filing system that could compete with tax prep giants

#338

Post by adventured »

sneak wrote: post #315
BurningFrog wrote: post #222

Earlier quoted context omitted.

You're not exactly wrong, but I think that's true of most countries. We're just not aware of foreign dirty laundry, and as a tourist you'll not notice.

Most industrialized countries in northern or western Europe have most government systems that are an order of magnitude less absurd than the American equivalents.

You just narrowed your claim down to a very small group of nations in the entire world.

It's like when people say: Europe is so much better at xyz. When what they mean is: Finland is amazing, you know, tiny little 5m person Finland, with very little diversity and a strongly exclusionary (just try immigrating into it as a low-skill poor person) homogeneous culture, it's amazing. The same goes for much of affluent Europe: it's hyper exclusionary, elitist, and often extraordinarily racist against outsiders.

Meanwhile the US is the world's largest economy, has welcomed tens of millions of poor people from the third world over the past 40 years (and that door is still very much open), has the third largest population and is hyper diverse compared to nearly all peers in Europe. Even Canada is drastically less diverse than the US. It's far easier to manage a nation that consists of an overwhelmingly dominant single culture, there are far fewer competing interests or complexities.

A country as large and complex as the US, with that much diversity, and that many layers of government to manage it all (federal, state, local; the US state government system is gigantic in its own right), is going to be a very messy machine. There's no scenario where that isn't going to be the case, no matter where it exists.

The only reasonable comparison regardless, due to the scale, is the US to Europe broadly. The US does just fine on that comparison. Shall we talk about how nice Western Russia is? How about the last 20-30 years of Greek and Italian history? Or is the premise to only refer to the good outcomes of Europe?

Re: IRS tests free e-filing system that could compete with tax prep giants

#339

Post by ethbr0 »

lazide wrote: post #256
ethbr0 wrote: post #207

Earlier quoted context omitted.

The difference is that if the IRS provided the only filing solution AND adjudicated taxes, there'd be no adversarial tension. Right now, the IRS is forced to establish some sort of data interchange format and adjudicate incoming tax filings equally, because they're required to work with TurboTax et al. (even if only required from a practical standpoint). If they also provided the only filing solution, that pressure w…

Huh? What adversarial tension is needed for filing ? It’s literally data entry. Tax prep/accounting (what to put where for cases where there is ambiguity) can always be different. That doesn’t apply to W2 earners though (in 99% of cases)

Free filing would by definition be both, as people using it would be unlikely to have separate tax prep services.

Ergo, imagine there's a checkbox option that would apply to 25% of free filers to save them money. How would the IRS free file handle that from a UX perspective? What are their incentives?

Alternatively, suppose a feature used by 10% of filers is broken for the current tax year. How long does it take to get fixed?

Current private solutions are incentivized to optimize those ("We save you the most money!") and fix them ("Our software isn't broken").

And because only the data transfers over to the IRS, all the prep optimization can be done independent of the IRS.

Some of the incentive concerns would be alleviated by (as this did) building this from a different branch of government (e.g. US-DS).

But at the end of the day, it's still the government telling you how much to pay the government. Or as the joke went about the 1040-EZ: "How much money did you make? Good. Give it to us."

Re: IRS tests free e-filing system that could compete with tax prep giants

#340

Post by YoyoyoPCP »

andrewla wrote: post #237

The steelman case for opposing "auto-filing" or having the IRS provide tax preparation is that the intention of requiring everyone to file is that all citizens should be directly aware of the amount of taxes being assessed and the complexity of the tax code itself, with the objective of making people oppose legislative increases in the complexity of the tax code, and to make tax increases more intrusive so that legis…

I also don't believe the people that say they want a simple tax code. This is the same country that loves coupons, discounts and promo codes. You really think they're gonna give up the tax breaks in the name of elegance and simplicity?
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