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Is this actually a thing in USA? Where you need a lawyer to do your taxes? Cause I'm in the EU, and this never happens.

by rmc 10y ago

bsimpson 10y ago
Some people hire a Certified Public Accountant; others use software like TurboTax. The American tax law is so complicated that doing them yourself leads to spending at least one weekend locked in your house with a calculator, filling out forms and hoping you don't get audited. Vox made a video about how companies like Intuit lobby to keep them complicated, to keep the money from TurboTax rolling in: http://player.ooyala.com/iframe.html#pbid=88e901a4b29c47ba959061faf8813e63&ec=poZDF5bDqkrR_LWWfdjlDIlpkohK8qYF http://player.ooyala.com/iframe.html#pbid=88e901a4b29c47ba95...
- schoen 10y ago
  > The American tax law is so complicated that doing them yourself leads to spending at least one weekend locked in your house with a calculator, filling out forms and hoping you don't get audited. This is very different for Americans with different income levels. If you earned less than $100,000 and "[y]ou had only wages, salaries, tips, taxable scholarship or fellowship grants, unemployment compensation, or Alaska Permanent Fund dividends, and your taxable interest was not over $1,500", you can use Federal form 1040EZ, which is one side of one page and asks only about 10 questions, none of which call for the tax filer to make choices. https://www.irs.gov/pub/irs-pdf/f1040ez.pdf https://www.irs.gov/pub/irs-pdf/f1040ez.pdf With rare exceptions (mostly related to immigration or expatriation, self-employment or owning a business, or suffering calamities), complicated calculations and the risk of audit apply to itemized deductions, which is when filers declare that some of their income should not be taxes because they did something, spent money on something, or suffered a problem that the government recognizes as reducing tax liability. Examples of this include business expenses, paying some foreign or local taxes, paying interest on a home loan (probably the most common!), some medical or educational expenses, or making donations to a qualified charity. Itemized deductions have a big role in economic decisions in the U.S. and are pretty well-known in culture, but most people don't use them at all, and usually only the most well-off people use them consistently. This is not necessarily just because the well-off people are more aware of the benefits of itemization or have more access to professional tax advice, but also because poorer people may often not be able to benefit from itemization at all, by not having spent enough money on relevant kinds of stuff. https://www.fas.org/sgp/crs/misc/R43012.pdf https://www.fas.org/sgp/crs/misc/R43012.pdf A simple summary is that only about 1/3 of all American tax filers claim itemized deductions, and higher-income people use them dramatically more often than lower-income people (mostly because they're more likely to own their own homes or incur unreimbursed business expenses, but also for various other reasons). The risk of a personal income tax audit is primarily that the government will decide to challenge a filer's entitlement to claim particular deductions, and then demand to see evidence of their legitimacy (which might be receipts or paperwork showing that certain expenses were actually incurred and appear to be related to the purpose claimed on the tax return). For example, if you said that you gave $15,000 to charity or that you spent $10,000 on travel for your consulting business, the IRS might ask for documentation during an audit to prove that these things really happened. While I don't mean to minimize the pain or intrusiveness of a tax audit and HN readers may be at real risk of experiencing one, I think most Americans' tax position is relatively simple for them to determine and gives no reason for an audit, because it's based only on information like W2 wage statements that other parties have already reported to the IRS! (Though I was surprised to see that the IRS says the average paperwork burden for form 1040EZ is 5 hours, which is about 5 times as long as I would have guessed and seems to count against my account of the situation. I'm also oversimplifying because people who support a spouse or children will have to file a different, more complicated form in order to get tax benefits from that, which is true of lots of Americans who don't own a home. At the same time, they won't necessarily have to do many extra calculations or provide much extra documentation related to the people they're supporting.)
schoen 10y ago
Most individuals don't hire lawyers for their individual income tax filings in the U.S., but most large businesses do. A lot of individuals do hire tax accountants who help them prepare their tax filings (and can advise them about their eligibility for certain tax benefits and statuses, including how to characterize certain income and expenses). Tax accountants are generally not lawyers, but have expertise about the tax system. However, I think this is only common for people who are wealthy, self-employed, own a house, own a business, or have some complication like having income in or living partly in multiple countries. I don't think it's very common for people who rent their homes and have only employment income from working for others.

Is this actually a thing in USA? Where you need a lawyer to do your taxes? Cause I'm in the EU, and this never happens.

by rmc 10y ago

Is this actually a thing in USA? Where you need a lawyer to do your taxes? Cause I'm in the EU, and this never happens.

Some people hire a Certified Public Accountant; others use software like TurboTax. The American tax law is so complicated that doing them yourself leads to spending at least one weekend locked in your house with a calculator, filling out forms and hoping you don't get audited. Vox made a video about how companies like Intuit lobby to keep them complicated, to keep the money from TurboTax rolling in: http://player.ooyala.com/iframe.html#pbid=88e901a4b29c47ba959061faf8813e63&ec=poZDF5bDqkrR_LWWfdjlDIlpkohK8qYF http://player.ooyala.com/iframe.html#pbid=88e901a4b29c47ba95...

schoen 10y ago
> The American tax law is so complicated that doing them yourself leads to spending at least one weekend locked in your house with a calculator, filling out forms and hoping you don't get audited. This is very different for Americans with different income levels. If you earned less than $100,000 and "[y]ou had only wages, salaries, tips, taxable scholarship or fellowship grants, unemployment compensation, or Alaska Permanent Fund dividends, and your taxable interest was not over $1,500", you can use Federal form 1040EZ, which is one side of one page and asks only about 10 questions, none of which call for the tax filer to make choices. https://www.irs.gov/pub/irs-pdf/f1040ez.pdf https://www.irs.gov/pub/irs-pdf/f1040ez.pdf With rare exceptions (mostly related to immigration or expatriation, self-employment or owning a business, or suffering calamities), complicated calculations and the risk of audit apply to itemized deductions, which is when filers declare that some of their income should not be taxes because they did something, spent money on something, or suffered a problem that the government recognizes as reducing tax liability. Examples of this include business expenses, paying some foreign or local taxes, paying interest on a home loan (probably the most common!), some medical or educational expenses, or making donations to a qualified charity. Itemized deductions have a big role in economic decisions in the U.S. and are pretty well-known in culture, but most people don't use them at all, and usually only the most well-off people use them consistently. This is not necessarily just because the well-off people are more aware of the benefits of itemization or have more access to professional tax advice, but also because poorer people may often not be able to benefit from itemization at all, by not having spent enough money on relevant kinds of stuff. https://www.fas.org/sgp/crs/misc/R43012.pdf https://www.fas.org/sgp/crs/misc/R43012.pdf A simple summary is that only about 1/3 of all American tax filers claim itemized deductions, and higher-income people use them dramatically more often than lower-income people (mostly because they're more likely to own their own homes or incur unreimbursed business expenses, but also for various other reasons). The risk of a personal income tax audit is primarily that the government will decide to challenge a filer's entitlement to claim particular deductions, and then demand to see evidence of their legitimacy (which might be receipts or paperwork showing that certain expenses were actually incurred and appear to be related to the purpose claimed on the tax return). For example, if you said that you gave $15,000 to charity or that you spent $10,000 on travel for your consulting business, the IRS might ask for documentation during an audit to prove that these things really happened. While I don't mean to minimize the pain or intrusiveness of a tax audit and HN readers may be at real risk of experiencing one, I think most Americans' tax position is relatively simple for them to determine and gives no reason for an audit, because it's based only on information like W2 wage statements that other parties have already reported to the IRS! (Though I was surprised to see that the IRS says the average paperwork burden for form 1040EZ is 5 hours, which is about 5 times as long as I would have guessed and seems to count against my account of the situation. I'm also oversimplifying because people who support a spouse or children will have to file a different, more complicated form in order to get tax benefits from that, which is true of lots of Americans who don't own a home. At the same time, they won't necessarily have to do many extra calculations or provide much extra documentation related to the people they're supporting.)

schoen 10y ago

Most individuals don't hire lawyers for their individual income tax filings in the U.S., but most large businesses do. A lot of individuals do hire tax accountants who help them prepare their tax filings (and can advise them about their eligibility for certain tax benefits and statuses, including how to characterize certain income and expenses). Tax accountants are generally not lawyers, but have expertise about the tax system. However, I think this is only common for people who are wealthy, self-employed, own a house, own a business, or have some complication like having income in or living partly in multiple countries. I don't think it's very common for people who rent their homes and have only employment income from working for others.