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13 States join the IRS direct-file test after tax prep firms dropped the ball

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Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#11

Post by sakjur »

itake wrote: post #8
mnky9800n wrote: post #5

In the 8 years since I lived in the United States my income taxes in other countries have been almost unbelievably easy. Typically I look at the calculated amount provided by a government website, compare it to what I think it should be if there is done discrepancy, upload some receipts or whatever for deductions, then click submit. It is beyond me why the experience should be any how different in the United States.…

JW, how do these countries handle non-employement or self-reported income (e.g. capital gains of real estate, equity, or even selling products online)?

In Sweden, certain things are reported to the government and others are not. Your task is to validate the prefilled tax forms and add missing income (above thresholds in place to allow for hobbyist level incomes) and deduct missing deductibles.

The typical process is to just approve it, but when you’re for example selling real estate you’ll have to append it with information about your capital gains minus deductible costs (broker’s fee, certain renovation costs, …).

The tax agency is famous for having excellent customer service and they operate under the principle “it should be easy to do right”. It hasn’t always been that way, but there was a mental shift similar to what direct-file advocates in the US seem to ask for in the 90s and that has worked out well.

If you’re curious, this is the English instructions for filing taxes over here: https://skatteverket.se/servicelankar/otherlanguages/inengli...

Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#12

Post by bell-cot »

kvdveer wrote: post #2

As a citizen of a country where tax is handled entirely by the government, schemes where for-profit corporations are part of the tax collection infrastructure seems absurd. As absurd as for-profit courts or for-profit election polling stations. The article mentions that the tax software maker opposes the government doing this, but doesn't mention public opinion. What does the average American think about this?

> What does the average American think about this?

Like most problems, the average American has (for political purposes) ~zero mental engagement with this. Vs. those for-profit corporations (and a variety of other interest groups) are intensely engaged. And it's all-too-frequently reported that any politician who wants to be (re-)elected to America's Congress needs to be intensely engaged with wooing interest group support and campaign fundraising.

Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#13

Post by andyjohnson0 »

Non-USian here. How does federal income tax work for people with a normal, regular job? If someone just works full time in a shop or on a factory line, do they get yearly tax demand that they have to check and/or calculate themself?

Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#14

Post by quickthrower2 »

itake wrote: post #8
mnky9800n wrote: post #5

In the 8 years since I lived in the United States my income taxes in other countries have been almost unbelievably easy. Typically I look at the calculated amount provided by a government website, compare it to what I think it should be if there is done discrepancy, upload some receipts or whatever for deductions, then click submit. It is beyond me why the experience should be any how different in the United States.…

JW, how do these countries handle non-employement or self-reported income (e.g. capital gains of real estate, equity, or even selling products online)?

In Australia there is a long form with each type and you type the numbers in. Pretty easy.

They don’t check upfront but there is always a chance you can get audited.

Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#15

Post by ImPleadThe5th »

andyjohnson0 wrote: post #13

Non-USian here. How does federal income tax work for people with a normal, regular job? If someone just works full time in a shop or on a factory line, do they get yearly tax demand that they have to check and/or calculate themself?

When you get a new job, you fill out some forms that tells the government how much money to withhold from your paycheck based on your expected earnings, deductions, etc.

Later, at the end of the year, you file your return of what you actually made, what your actual deductions were, etc. And then the government will either pay you if you paid too much or they will ask you to pay if you did not pay enough.

Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#16

Post by broken-kebab »

sdenton4 wrote: post #7
mnky9800n wrote: post #5

In the 8 years since I lived in the United States my income taxes in other countries have been almost unbelievably easy. Typically I look at the calculated amount provided by a government website, compare it to what I think it should be if there is done discrepancy, upload some receipts or whatever for deductions, then click submit. It is beyond me why the experience should be any how different in the United States.…

"And tax politics make strange bedfellows. Fighting alongside H&R Block and Intuit are anti-tax activist groups like Grover Norquist’s Americans for Tax Reform. H&R Block and Intuit love taxes—that’s how they make their money. Grover Norquist wants to cut taxes wherever possible. But on this issue, their interests are aligned. H&R Block and Intuit want to make it difficult for you to file on your own. The anti-tax ac…

US taxes were pretty cumbersome before Intuit et al. Intuit wouldn't appear if not that. So your quote may partially explain resistance to change, but not causes.

Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#17

Post by glimshe »

andyjohnson0 wrote: post #13

Non-USian here. How does federal income tax work for people with a normal, regular job? If someone just works full time in a shop or on a factory line, do they get yearly tax demand that they have to check and/or calculate themself?

It can be pretty easy. When I started my professional life in the US, taxes were relatively simple because I basically had two sources of income (job and interest investments). You enter 2 forms, ignore a lot of prompts in the tax software (do you do X? Do you do Y?) and go for it. You can even file your taxes for free - in theory - if you have a simple life like that. A lot of taxpayers do.

The problem that makes things a lot more complicated is that the US has many little mechanisms for reducing your tax liability that are very tempting to use (and oftentimes inevitable): 401k, HSAs, mortgage interest deduction, 529 accounts, long term capital gains, capital loss offsets etc. HN readers tend to be more educated than average and have a higher income than average. Also, a lot of math-inclined, optimizer types here who will absolutely want to take advantage of these features in the tax code.

When you start adding every little way to pay less taxes, or start doing more interesting things in your life such as setting up a small business or buying property, tax preparation can become a nightmare.

Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#18

Post by andyjohnson0 »

ImPleadThe5th wrote: post #15
andyjohnson0 wrote: post #13

Non-USian here. How does federal income tax work for people with a normal, regular job? If someone just works full time in a shop or on a factory line, do they get yearly tax demand that they have to check and/or calculate themself?

When you get a new job, you fill out some forms that tells the government how much money to withhold from your paycheck based on your expected earnings, deductions, etc. Later, at the end of the year, you file your return of what you actually made, what your actual deductions were, etc. And then the government will either pay you if you paid too much or they will ask you to pay if you did not pay enough.

Thanks. Presumably such a person wouldn't need tax-return software?

The system here in the UK is similar, except that "regular workers" don't file a tax return. Work-related deductions/additions (e.g. private health plans) are reported by the employer and are automatically accounted for. Non-work stuff like capital gains on personal property sales are mostly dealt with as part of the transaction.

Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#19

Post by yurishimo »

andyjohnson0 wrote: post #18
ImPleadThe5th wrote: post #15

Earlier quoted context omitted.

When you get a new job, you fill out some forms that tells the government how much money to withhold from your paycheck based on your expected earnings, deductions, etc. Later, at the end of the year, you file your return of what you actually made, what your actual deductions were, etc. And then the government will either pay you if you paid too much or they will ask you to pay if you did not pay enough.

Thanks. Presumably such a person wouldn't need tax-return software? The system here in the UK is similar, except that "regular workers" don't file a tax return. Work-related deductions/additions (e.g. private health plans) are reported by the employer and are automatically accounted for. Non-work stuff like capital gains on personal property sales are mostly dealt with as part of the transaction.

The user you're replying to simplified the process some. There is no government website that will tell you exactly what you owe. You always are doing the math yourself and then hoping that you did the math correctly. Even for a refund, it's up to you to tell the government that you overpaid.

The reason you might have heard a lot of fuss around hiring more IRS agents, is that the only way to validate these numbers if to be audited (broadly speaking). There might be some automated checks for very obvious things but much of the process is self-reported.

The software is largely there to help people with the math and accounting for all of the deductions that the average person may be eligible for (mortgage interest being the largest and most common).

Re: 13 States join the IRS direct-file test after tax prep firms dropped the ball

#20

Post by maccard »

glimshe wrote: post #17
andyjohnson0 wrote: post #13

Non-USian here. How does federal income tax work for people with a normal, regular job? If someone just works full time in a shop or on a factory line, do they get yearly tax demand that they have to check and/or calculate themself?

It can be pretty easy. When I started my professional life in the US, taxes were relatively simple because I basically had two sources of income (job and interest investments). You enter 2 forms, ignore a lot of prompts in the tax software (do you do X? Do you do Y?) and go for it. You can even file your taxes for free - in theory - if you have a simple life like that. A lot of taxpayers do. The problem that makes th…

> taxes were relatively simple because I basically had two sources of income (job and interest investments). You enter 2 forms, ignore a lot of prompts in the tax software (do you do X? Do you do Y?) and go for it. You can even file your taxes for free - in theory - if you have a simple life like that. A lot of taxpayers do.

That's way too complicated. In the UK, for the vast vast majority of people, there are no forms. if you meet the criteria in this quiz [0] (self employed top 5% of earners, or other large incomes), you get a pre-filled-in form that you enter extra numbers into. For the vast vast majority of people, you never see this form, and most people who fill in this form just click through it.

[0] https://www.gov.uk/check-if-you-need-tax-return

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