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

theverge.com

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

#51

Post by AnimalMuppet »

> Arizona, California, Massachusetts and New York have decided to work with the IRS to integrate their state taxes into the Direct File pilot for filing season 2024. Taxpayers in nine other states without an income tax – Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming -- may also be eligible to participate in the pilot. Washington has also chosen to join the integration effort for the state's application of the Working Families Tax Credit. All states were invited to join the pilot, but not all states were in a position to join the pilot at this time.

Since the article didn't bother to list the states, as far as I could see...

From https://www.irs.gov/newsroom/irs-advances-innovative-direct-..., which is linked by the article.

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

#52

Post by aimor »

BrandoElFollito wrote: post #22

We have in France pre-filled taxes, you go to the tax site, click next a few times and you are done. Takes 30 seconds for 90% of the population. Usually people do not even check what they click if they have a standard job. Is the system in the US much more complicated to require software purchases? I get it that it is not prefilled, but is there a lot to actually input in the system?

This is the standard tax form from 2022: https://www.irs.gov/pub/irs-pdf/f1040.pdf

You're expected to enter all of your income, sort out what portion of your income is taxable, determine the amount you can deduct from your taxable income, figure out what tax credits you're entitled to, calculate how much tax you already paid and what you still owe or should be refunded, and decide how you want to pay or be reimbursed.

In the simplest case it's straightforward.

But for anything other than the simplest case it quickly becomes a mess of additional forms (called schedules). Currently there's 3 main schedules (1, 2, 3) for Income Adjustment, Additional Taxes, and Additional Credits. And each of those references addition schedules and forms. Here's schedules 1, 2, 3: https://www.irs.gov/forms-pubs/about-form-1040 Here's a list of the other schedules: https://www.irs.gov/forms-pubs/schedules-for-form-1040 and a search for all the forms and instructions: https://www.irs.gov/forms-instructions-and-publications

The good news is, after all that, if you make a mistake the IRS will tell you what you actually owe and send you either a bill or a check for the difference.

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

#53

Post by AlexandrB »

knubie wrote: post #9
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? That all depends on the government's execution. If they can deliver a system that is more convenient to use, cheaper (no, government services are not "free") and provides better results, then I'm all for it.

I'm pretty sure in this case it could be actually free since the government already collects and verifies all the required information.

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

#54

Post by vonwoodson »

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.…

How have you forgotten the most important thing ever? It’s Freedom.

Because, Freedom. And, because America.

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

#55

Post by vonwoodson »

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?

It’s very much a “who cares?” Issue. It’d be cool… but: taxes are still super easy to file for 90% of people. You’ve literally always been able to file your taxes by paper and not have to pay anyone anything to do so. It does not have to be a digital system and the government should not chase technical solutions unless it genuinely benefits its operation and legal requirement.

If people want easy taxes then they can hire someone. That seems to be the market solution to most problems.

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

#56

Post by vonwoodson »

bell-cot wrote: post #12
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 s…

Here here! And, that is honestly the best. It’s why we have a republic and not a “pure democracy”. Nobody likes taxes, but other than having to interface with the system once a year… who cares? I can pay H&R Block $X or pay $Y more in taxes. Whoopie!

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

#57

Post by poiop »

lawn wrote: post #46
poiop wrote: post #40

Earlier quoted context omitted.

Taxes in Sweden are generally effortless. Deductions, investments and benefits are often generous and easy to file. Unfortunately if you are more modest the story is a bit different. It is great if you are established. You might have a big house, high maintenance costs, use cleaning services, invest a lot in the stock market and other things that comes with all that. Because not only is it easy but you get a lot of p…

You're comparing the tax system, but the main topic is simply the act of filing your taxes. Which is indeed extremely easy here in Sweden comparatively.

I am not really comparing tax system, or at least that isn't the intention. The Swedish tax system is easy as long as you stick to those accounted for benefits.

Say if you make a $100k a year and you pay social security for public pension among other things but public pension only gives you credit up to $50k a year. Now if you have a big house you can deduct renovations so your income is for tax purposes is, say, $75k.

If you don't have a big house and your income is a $100k you still get the same public pension but are taxed on the full amount. Now if you started a company and hired yourself through that you could lower your personal income and instead take out dividend so you are also taxed on $75k. But to do that you now have to file much more complicated taxes, with actual accounts and often accountants.

In reality it is even worse because many do the first thing but then also have a company. So they pay themselves $50k a year and then use deductions on that to lower the effective amount even more. So I am out here paying on a $100k so they can have a nice life. (The numbers are made up, salaries and individual benefits are usually less than that and the example might not be entirely accurate but the overall point stands).

None of this really relates to the US tax system, but it is a similar problem in that if I want the best financial situation (by a decent margin) I need to file complicated taxes and a lot of people do exactly that mainly for tax purposes. Swedish sentiments just haven't caught up yet.

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

#58

Post by [deleted] »

shiroiuma wrote: post #35
sdenton4 wrote: post #7

Earlier quoted context omitted.

"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…

>The anti-tax activists think that if taxpaying is too easy, voters will be less likely to resist the federal government’s growth. Both want to make it as painful as possible for you to do your taxes yourself. This sounds a lot like the logic the US government uses with regards to normalizing relations with Cuba. They think that by keeping up an embargo, that the Cuban people will rise up and overthrow their communis…

[deleted]

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

#59

Post by rocmcd »

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…

Otherwise known as the "bootlegger and baptist" problem.

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

#60

Post by ImPleadThe5th »

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.

Sorry I don't think I clarified enough. To fill out your expected taxes you have to do calculations to determine the proper deductions. So very often you do end up owing because your original paperwork wasn't quite right.

The software is not necessarily "required" you could fill out all of these forms by hand and the IRS also provides online software to aide in filling some of the forms. Many people do do this if they have very simple tax situations and they don't mind dedicating some time to it.

However, due to the complexity of the filing it often is just easier to pay turbotax, HR block, etc to ask some questions and auto-populate the forms for you.

There is also weirdly specific forms you sometimes need for certain deductions/situations (foreign income, foreign bank accounts, investments, crypto, living on a college campus, school supply tax reductions, etc) and its not always obvious when you need to fill these forms out, you could read the IRS website but that's excruciating. So often times these tax softwares also ask questions to help you determine what forms are necessary to have a complete return or help you maximize your deductions by finding the ones you qualify for.

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