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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

#81

Post by MrRadar »

spandextwins wrote: post #72

A value added tax on goods would be good, then we wouldn't have to file taxes at all. Or just get rid of federal income taxes all together like they did around 100 years ago.

Low income individuals spend a far greater share of their income on goods that would be subject to VAT than high-income individuals. Eliminating income tax would shift the burden of paying for government even more to the people who can least afford it.

Ideally, taxation should be a mechanism that redistributes wealth within society to be more equitable which ultimately benefits everyone, even the wealthy, by increasing overall economic growth. Income tax is a very good mechanism to achieve that goal (though definitely not perfect) and I agree with Thomas Piketty that we should add a small wealth tax on the very wealthiest individuals.

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

#82

Post by ghaff »

bell-cot wrote: post #65
vonwoodson wrote: post #56

Earlier quoted context omitted.

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!

/s, perhaps? Summed across the whole economy, the total $X being paid to America's "Tax-Industrial Complex" is vastly more than the total $Y that it'd cost to have an efficient government-run system.

I expect most of the people who spend substantial amounts of time/money on doing taxes in the US would spend substantial time/money on taxes in most other countries too--unless it's a country where a lot of people basically evade paying taxes at all.

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

#83

Post by flandish »

hiatus wrote: post #68
flandish wrote: post #62

Earlier quoted context omitted.

Deductions and credits: I posit, they could know based on how interlinked everything is. You have 3 kids registered in school? It’s in a db. Buy an EV? It’s in a db. But yeah- fair point. There are lots of “quiet” transactions for sure, but that’s likely no different in any other nation with better tax cycles.

> Buy an EV? It’s in a db I don't expect car purchases to be in a federal database (or the schools my children attend, for that matter).

You don’t expect it, but it is. And all I am saying is that I’m not surprised it isn't already “part of the process.” Just because it’s not part of our filing process doesn’t mean the data and its relationships don’t exist.

Heck, I’m the first to say 99% of this should not exist in the first place. (That means I think the nation state concept should not exist.. there should be none.)

But be honest with yourself: you know society tacitly accepts interfaces between dbs for the corporate purpose of profit… (advertising, etc)

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

#84

Post by hn8305823 »

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?

> Is the system in the US much more complicated to require software purchases?

It's intensely more complicated.

My 2022 Federal tax filing was over 50 pages. I gave up trying to do it myself with TurboTax about 10 years ago and that was one of the best decisions I have ever made. I can sleep well at night knowing that as long as I provided the necessary information to my accountant, all the right forms will have all the right stuff on them.

IMO, nobody but the most trivial W-2 only taxpayer should be doing it themselves.

The state filing in my state is much simpler because it mostly piggybacks off the information in the Federal return and doesn't require dozens and dozens of additional forms.

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

#85

Post by ghaff »

migf wrote: post #64
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 has gotten simpler in recent years. For people who just have regular jobs and families, you probably just have a wages statement from your employer (w-2). Most taxes are taken out already at payroll time. You add up all your w-2's and report on how many children you have and based on that you can calculate your taxes. The forms used to calculate this are quite complicated because they are designed to be very versa…

The 1040-EZ actually got dropped. I don't actually know the logic but I assume it was something along the lines of just use the 1040 and just fill out the relevant parts.

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

#86

Post by amerkhalid »

ghaff wrote: post #74
Retric wrote: post #28

Earlier quoted context omitted.

Taxes weren’t particularly difficult if like most people you were overpaying before this software showed up. The complexity was originally a way to effectively have different rules for people with accountants than regular citizens thus allowing politicians to shift the tax burden without making the carveouts obvious. Now days we just blatantly tax people living off investments less, etc. Thus defeating the original p…

And the reality today is that, if like a lot of people, you just have a W2 and maybe a 1099 or two, while the 1040 form is probably a bit intimidating, it's pretty straightforward if you're just taking the standard deduction as most people do since Trump era tax changes. Basically, if you're eligible for any of these direct-file arrangements, your taxes are pretty easy to file anyway. I'm all for simplifying tax fili…

I think they should get rid of all deductions at the individual levels. They just cause confusion and hide true cost of things.

For example, I went to buy Jeep. 4xe version was $8000 more. But its battery lasts only 2-3 miles and it would have taken forever to breakeven. But dealership kept insisting that I will get $6000 in tax rebate/deductions so the actual cost is only $2000 more.

They had marked up the car by how much government was going to give rebate on and there was no savings for a taxpayer. I tried to have them issue give me discount now and claim my car on their taxes but, of course, that was not going to work. I ended up buying a cheaper model.

EDIT: Just checked the range, it is actually 21 miles on battery, which would have been enough for my usage. At that time, salesperson informed me that it was 3 miles or so. At 21 miles per charge, I may have bought 4xe. Math still doesn't workout, since I work from home I probably fill the gas tank once every 2-3 months. About $200-300 per year for gas. So it would have taken 7-10 years to breakeven after rebates.

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

#87

Post by jacobr1 »

ghaff wrote: post #74
Retric wrote: post #28

Earlier quoted context omitted.

Taxes weren’t particularly difficult if like most people you were overpaying before this software showed up. The complexity was originally a way to effectively have different rules for people with accountants than regular citizens thus allowing politicians to shift the tax burden without making the carveouts obvious. Now days we just blatantly tax people living off investments less, etc. Thus defeating the original p…

And the reality today is that, if like a lot of people, you just have a W2 and maybe a 1099 or two, while the 1040 form is probably a bit intimidating, it's pretty straightforward if you're just taking the standard deduction as most people do since Trump era tax changes. Basically, if you're eligible for any of these direct-file arrangements, your taxes are pretty easy to file anyway. I'm all for simplifying tax fili…

And the 1040EZ is even easier to fill out and probably works for the majority of taxpayers. But the bigger issue isn't filling out the form ... it is on the data side. If the IRS were to send you an invoice, independent of how complex the calculations are, the work to validate their data is much different than starting from scratch.

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

#88

Post by jameshart »

pjc50 wrote: post #44
itake wrote: post #8

Earlier quoted context omitted.

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)?

UK: no CGT on your home, only investment properties. https://www.gov.uk/tax-sell-home (in some ways this is a pretty big middle class giveaway, but it also hugely simplifies things) UK equity: smart people use an ISA wrapper https://www.gov.uk/individual-savings-accounts/how-isas-work or a pension, both of which are tax free for people with normal incomes and wealth. Selling online: after £1000 you're a "trader" and…

Another great example of how the UK handles things differently in a way that shifts the filing burden off the taxpayer is charitable tax deductions.

In the US taxpayers track their charitable giving and use it to reduce their taxable income at filing time.

In the UK when you donate to a charity you attest to that charity that you are a UK taxpayer and that the donation is therefore gift aid eligible, and the charity just goes to the tax office and collects an extra 25% on top of the donation.

So in the US, say, you earn $150, pay $50 in tax withholding, then donate $100 to a charity, then claim the donation to the IRS to say you shouldn’t be taxed on $100 of your earnings, so you should only have paid $30 in taxes, and you claim back $20. You have $20, charity has $100, taxman has $30.

In the UK you earn £150, pay £50 in PAYE, then give £80 to a charity, keeping £20 and telling the charity they can giftaid it. Charity goes to the taxman and asks for another £20. End result, you have £20, charity has £100, taxman has £30.

Essentially the same outcome - charity donations are tax advantaged - but the paperwork for taxpayers is much simpler.

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

#89

Post by ghaff »

jacobr1 wrote: post #87
ghaff wrote: post #74

Earlier quoted context omitted.

And the reality today is that, if like a lot of people, you just have a W2 and maybe a 1099 or two, while the 1040 form is probably a bit intimidating, it's pretty straightforward if you're just taking the standard deduction as most people do since Trump era tax changes. Basically, if you're eligible for any of these direct-file arrangements, your taxes are pretty easy to file anyway. I'm all for simplifying tax fili…

And the 1040EZ is even easier to fill out and probably works for the majority of taxpayers. But the bigger issue isn't filling out the form ... it is on the data side. If the IRS were to send you an invoice, independent of how complex the calculations are, the work to validate their data is much different than starting from scratch.

1040EZ doesn't exist any longer. I tend to agree with the broader point--even if it would probably nudge some taxpayers to overlook deductions they're entitled to.

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

#90

Post by sokoloff »

poiop wrote: post #40
sakjur wrote: post #11

Earlier quoted context omitted.

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…

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…

> then I would have to file much more complicated taxes and therefor get much less enjoyment from taxes being easy for personal income. Still by not doing so I am giving up tens of thousands of dollars a year.

For tens of thousands of dollars per year, surely some tax/company admin service exists that could offload the vast majority of the tedium from you, leaving you with perhaps 10-20 hours of effort/personal attention per year. Even if they take half of the $20+K savings as their fee, that leaves you with $10+K to put in your pocket for a little over a day of total effort. That's $500-$1000 or more per hour of effort (all tax-free).

That seems like a huge overlay for you.

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