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

washingtonpost.com

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

#551

Post by RajT88 »

whiplash451 wrote: post #496
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.

Billions of dollars is a massive overestimate. It will indeed cost dozens of millions, but billions? Come on. We're not building the F-35 here.

Yeah, the article states some range between 64 million and a few hundred million. But over the course of years, total costs will surely be over a billion. I'm happy to indulge the lobbyist quote in that spirit.

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

#552

Post by Spooky23 »

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"

Great idea. Let’s start with your pretax health insurance, standard deduction, dependent and mortgage/salt deductions.

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

#553

Post by phpisthebest »

NoMoreNicksLeft wrote: post #526
morning-coffee wrote: post #500

Earlier quoted context omitted.

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 fe…

You can make a progressive simple tax.

The problem is not progressive taxation, the complexity comes in when government attempts social engineering via the tax code by incentivize behavior they deem "good" and penalizing behavior they deem bad

i.e tax credits for EV's , children, different taxes for married vs unmarried persons, etc etc

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

#554

Post by RajT88 »

phpisthebest wrote: post #542
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.

>>It will cost taxpayers billions of dollars. Why on earth would, or should it cost that much? Unless they go full on "not invented here" and write it running on a IBM Mainframe running COBOL that they then pay an over priced consultant to somehow make web compatible

A place I worked built out a SQL server which had a TCO of a million dollars a year. 1 Machine. Don't ask me how it all adds up; the manager over it just quoted me that at a work social one time.

I don't know how much it cost a customer I had to build over a couple decades, but their eCommerce website had an operational run rate of at least 3 million a month just in cloud costs (not including all the other externalities).

All this to say that I can see how it might add up.

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

#555

Post by noisy_boy »

foobarian wrote: post #455
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.

"A fence around the chicken coop is wholly redundant and is nothing more than a solution in search of a problem," said Sly the Fox. "It will unnecessarily cost the farmer thousands of dollars and especially harm the most vulnerable chickens."

More like an escape door in the coop; the big-government-hating, freedom-loving chickens still can choose to stay in the coop.

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

#556

Post by andrewla »

ChrisRR wrote: post #468
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…

In the UK how much tax is taken is stated on our payslips. Nothing hidden about it, it's stated right there with your pay and your take-home

Sure, but how often does one look at one's payslip? The money gets deposited in your account. I don't know about the UK, but the amount that gets deposited tends to vary because of small issues, so a different number on my bank statement doesn't trigger alarm bells.

It would be very easy to change my taxes without my knowledge as a result, if the only feedback we had on taxes was what was deducted from our payroll. In the US, there are deductions taken from the paycheck directly, including anticipated federal income tax (called "withholding" here) but also many other miscellaneous taxes.

The withholding, in particular, represent an advance payment on your annual income tax, which you still have to calculate and file. If you withheld more than you owe, then you get a refund, if less than you owe taxes. But regardless you have to compute how much you owe and how much you paid on an annual basis so that you can see it all at once.

Once again, I do not think this method works, but the theory behind it is that this will make it hard to quietly raise taxes, and hard even to maintain current levels of taxation, because it will be a painful process that will make it clear what the current situation is.

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

#557

Post by userabchn »

bradfa wrote: post #486

If the federal government really wanted to save money on tax collection, improve the accuracy of tax collection, and drive the tax preparation industry out of business which would save every person and company significant money, then the federal government would just simplify the tax code. Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane. For tax in…

Reducing the burden for those filing their taxes is nice, but an effect of simplifying the tax code that I am more interested in is that it restricts the power of the government (and so the reduces the attractiveness of lobbying politicians). The complexity provides opportunities for lobbyists to design rules that distort markets in their favour.

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

#558

Post by natnat »

bradfa wrote: post #486

If the federal government really wanted to save money on tax collection, improve the accuracy of tax collection, and drive the tax preparation industry out of business which would save every person and company significant money, then the federal government would just simplify the tax code. Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane. For tax in…

This a really classically difficult political problem of concentrated benefits with diffuse costs. The complication of the tax code comes from a zillion little exceptions added over the years, and every little exception has a beneficiary who doesn't want the existing system to change.

Imagine you're a congressperson trying to simplify the tax code. If you want to remove a single little exception, you're going to piss someone off a whole lot for not much benefit. If you want to do a big refactor and lower everyone's rate while cutting a ton of exemptions, you need to fend off zillions of loud, empowered interest groups.

As recently as 2017, congress tried to simplify the tax code with the TCJA. Paul Ryan and co tried very hard to make the tax code simpler while also cutting rates, and the process failed under the enormous pressure from interest groups. They ended up leaving pretty much every exception in place, and only cutting a few high-value tax benefits (like the SALT deduction) that benefited people from the other political party.

When there's no clear path to actually solving the problem, a hack that makes things better in the interim can be a really helpful solution.

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

#559

Post by noisy_boy »

bradfa wrote: post #550
psxdude wrote: post #543

Earlier quoted context omitted.

The majority of high school graduates can probably easily file their taxes, since their income is likely entirely W-2.

If they're single, have only W-2 income, and have no children, then maybe... Just the child tax credit for 2022 requires filing an additional schedule 8812 (which is somehow referred to in some places as schedule 8) and in order to complete schedule 8812 you have to choose the correct worksheet and fill that in, but not file it. All of that results in a single credit value which is 1 line on the form 1040. This is no…

That is horrible indeed but I guess it is unavoidably so - you can't effectively have n-level nested if-else and lookups on a paper without making it complicated. Translated into code, it should become much simpler with progressive inputs/filtering.

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

#560

Post by noisy_boy »

mediascreen wrote: post #533
bradfa wrote: post #486

If the federal government really wanted to save money on tax collection, improve the accuracy of tax collection, and drive the tax preparation industry out of business which would save every person and company significant money, then the federal government would just simplify the tax code. Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane. For tax in…

I filed my Swedish taxes yesterday. It included private income and investments, my own sole proprietorship as well as dividends from a larger company where I own 10%. It took around 30 minutes including all calculations. We may have high taxes, but at least they make it easy to pay them...

Even low-tax countries like Singapore make it ridiculously easy to pay them.
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