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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

#521

Post by zdragnar »

whiplash451 wrote: post #504

I live in EU, and it still beats me that the U.S. IRS still hasn't developed its own software for filing taxes. This should be the only entry point IMO. In my country: 1. our IRS owns the software 2. the forms are pre-filled with all the data they already have about me 3. they send me an email if they spot an error (both ways) I could not imagine it differently.

Since the tax reforms under Trump, the standard deduction is high enough that there's not much point in anyone else doing my taxes.

Prior to that, though, the tax code is so encumbered with all of the various exemptions and deductions and carve outs that it was easier and less stressful to have someone else do it. I somewhat recently bought a house, so the mortgage interest deduction comes close on its own to not take the old standard deduction.

There are plenty of these things that the government isn't going to know about- health expenses, state and local taxes (state would be easy enough to keep up with, but local taxes change all the time), even things like a deduction if you keep a home office.

The operating theory is that the federal government isn't incentivized to hunt down all of these things for you (or cannot legally know about ahead of time without violating your privacy), and will over-charge you by pre-filling out the paperwork.

This is where commercial companies believe (or claim) that they are doing good- they ostensibly have a motivation to provide better results than their competitors, and so will do the best job to ensure you are paying the legally required amount of taxes without overpaying.

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

#522

Post by adventured »

jcranmer wrote: post #488
rocketbop wrote: post #424

> A direct-to-IRS e-file system is wholly redundant and is nothing more than a solution in search of a problem," said Rick Heineman, a spokesman for Intuit, the company behind TurboTax. "That solution will unnecessarily cost taxpayers billions of dollars and especially harm the most vulnerable Americans." Extraordinary that he could say that sentence with what I assume was a straight face.

There are about ~160 million people who need to file taxes each year. TurboTax for each year costs something like $40-150 depending on how complex a version you need. If it costs billions of dollars to role out a free system that's as good as TurboTax, that'll still pay for the cost of TurboTax or similar software within a few years at the longest.

Just for reference sake in this thread, TurboTax has around 40 million users each tax year. Around half of taxpayers use tools to file on their own. So they have around 1/4 of personal filings, and half the do-it-yourself market.

Most of Intuit's business is sheltered from the hit it will take when the IRS completes this system. They'll probably lose a couple billion in sales off the top (out of $13.6 billion the past four quarters).

You could probably take away 3/4 of their entire individual tax prep business and their overall business would still be larger than it was in 2020. I'll be interested to see if it pops the bubbly valuation the stock is carrying (~60 times earnings).

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

#523

Post by bee_rider »

RajT88 wrote: post #445
rocketbop wrote: post #424

> A direct-to-IRS e-file system is wholly redundant and is nothing more than a solution in search of a problem," said Rick Heineman, a spokesman for Intuit, the company behind TurboTax. "That solution will unnecessarily cost taxpayers billions of dollars and especially harm the most vulnerable Americans." Extraordinary that he could say that sentence with what I assume was a straight face.

On some counts, he is not wrong. It will cost taxpayers billions of dollars. Those billions of dollars will be well spent, and may be a net 0 cost for taxpayers after the savings on eFiling. This is a revocation of the license to print money by the tax prep industry.

He might be right that it will cost a couple billion dollars.

A one time expense of a couple billion dollars is, like… I mean the public servants working on it should take it very seriously but it is a drop in the bucket, the US budget is measured in trillions. This is one of those “the difference between a millionaire and a billionaire is about a billion dollars” type things, except the billion is the little one.

Edit: I mean there are like 300 million of us, so even it it was shared equally, it is like… for the price of a particularly fancy latte we can all collectively fuck over these middleman tax processing companies, let’s do it!

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

#524

Post by bguebert »

amelius wrote: post #439
opzz wrote: post #425

They should open source this. I would actually contribute to making this usable.

Makes you wonder why there wasn't an open source tool for this to begin with. Why did nobody feel the urge to make this?

It's the exact opposite of a fun to work on project. It would be all maintenance and constantly changing specs.

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

#525

Post by mminer237 »

RajT88 wrote: post #445
rocketbop wrote: post #424

> A direct-to-IRS e-file system is wholly redundant and is nothing more than a solution in search of a problem," said Rick Heineman, a spokesman for Intuit, the company behind TurboTax. "That solution will unnecessarily cost taxpayers billions of dollars and especially harm the most vulnerable Americans." Extraordinary that he could say that sentence with what I assume was a straight face.

On some counts, he is not wrong. It will cost taxpayers billions of dollars. Those billions of dollars will be well spent, and may be a net 0 cost for taxpayers after the savings on eFiling. This is a revocation of the license to print money by the tax prep industry.

For reference, Inuit's revenue was $12.7 billion last year, so they single-handedly cost the taxpayers more each year than this whole free system will.

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

#526

Post by NoMoreNicksLeft »

morning-coffee wrote: post #500
RajT88 wrote: post #445

Earlier quoted context omitted.

On some counts, he is not wrong. It will cost taxpayers billions of dollars. Those billions of dollars will be well spent, and may be a net 0 cost for taxpayers after the savings on eFiling. This is a revocation of the license to print money by the tax prep industry.

One way for it not to cost tax payers billions of dollars to drastically simplify the tax code while they are at it. A big part of the cost is directly attributable to the complexity of the rules to be followed to figure out how much to pay based on your circumstances. Throw all that nonsense out and all that should be left is a relatively simple "You made X, so you owe X * rate"

The tax code can't ever be simplified... simplification is effectively equivalent to eliminating all the various tax breaks that people are eligible for. A simple (perhaps the simplest) one sentence tax code is "everyone pays 10% of gross income"... this is considered regressive. As you add to the tax code to make it less painful, it grows more complicated.

Some large fraction of the population effectively pays no federal income tax at all. The rules for exempting them and discounting them to the point of $0 owed alone accounts for some significant portion of the tax code.

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

#528

Post by bradleyjg »

jcranmer wrote: post #488
rocketbop wrote: post #424

> A direct-to-IRS e-file system is wholly redundant and is nothing more than a solution in search of a problem," said Rick Heineman, a spokesman for Intuit, the company behind TurboTax. "That solution will unnecessarily cost taxpayers billions of dollars and especially harm the most vulnerable Americans." Extraordinary that he could say that sentence with what I assume was a straight face.

There are about ~160 million people who need to file taxes each year. TurboTax for each year costs something like $40-150 depending on how complex a version you need. If it costs billions of dollars to role out a free system that's as good as TurboTax, that'll still pay for the cost of TurboTax or similar software within a few years at the longest.

Much better options than TurboTax already exist. I don’t know that a new one, even written by the government, will make a huge dent.

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

#529

Post by NoMoreNicksLeft »

Longlius wrote: post #508

I like how the one thing Hacker News can agree upon is that the tax prep software business is unabashed rent-seeking.

I'd hope that we could all agree on something so empirically verifiable and obvious.

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

#530

Post by habosa »

codeulike wrote: post #515

In the UK the equivalent to IRS is called HMRC. People who are just in normal employment dont need to submit their taxes because it Pay As You Earn (PAYE) and so its all obvious. But if you are self employed or get paid dividends or made a capital gain or sundry other exceptions then you have to submit a tax return. HMRC provide a web app for you to submit your tax return should you need to. Its a pretty good app. It…

This. The HMRC system is excellent and should be in the realm of possibility for America. The UK economy is very similar to ours.

And as an American who lived in the UK for a few years I did have to file a self assessment, which had me pretty scared.

My UK tax return was ~5 pages long and took me ~2 hours to complete. My US tax return for the same year was ~200 pages long and took an accountant weeks to complete. I don't do anything interesting (I have a wage-earning job and some stock investments, I own no property in any country).

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