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“Your taxes” is such an overloaded term that it’s almost comical to refer to it as if it means the same thing for everyone. There is basically one straight-for

“Your taxes” is such an overloaded term that it’s almost comical to refer to it as if it means the same thing for everyone. There is basically one straight-forward case where the IRS preparing taxes makes sense: that of full time employees whose only income is from their job which issues W2s. For everyone else — which includes: - People working multiple part time jobs - People with non-standard investment portfolios or real estate holdings - Contractors, with or without an LLC - Full time employees who are also contractors - Dual residents - Small retail businesses - Small internet businesses - Megacorps — there is a different set of requirements. The idea that the IRS would be able to optimize everybody’s return so they pay the least amount of tax, is absurd. And that’s not even considering the moral hazard of misaligned incentives, i.e. the IRS has no incentive to make sure you deduct as much as legally possible from your return.

clarkevans 8y ago
Everyone else is, what 10% of filers? If you're in the 10% you'll know it and you'll do private preparation.
- ghaff 8y ago
  About 2/3rds of people do file a 1040 rather than a 1040A or 1040-EZ which at least suggests that most people do have taxes that are more complex than just just a W2 and a standard deduction.
  - ghouse 8y ago
    Like a 1099? The government has this data as well.
  - kevin_thibedeau 8y ago
    Most people are using tax prep services that will default to 1040 since their software doesn't care about which form is going to be used and it's simpler to code for just the general case.
- teej 8y ago
  Just back of the napkin, but there are 28 million small businesses and 130 million full time employed adults in the US. So no. It’s likely much higher than 10%.
debacle 8y ago
I mean the standard deduction is being raised substantially. That's going to make the amount of people hitting the limit far lower.
VikingCoder 8y ago
What makes it so hard for "People working multiple part time jobs"? "And that’s not even considering the moral hazard of misaligned incentives, i.e. the IRS has no incentive to make sure you deduct as much as legally possible from your return." This article isn't advocating that your taxes would be submitted without your review. It's advocating that they be PREPARED. As in prepared for further editing or review.
ebiester 8y ago
Think of it more as "The IRS has prepared this return for you. Look at it. If it's what you expect, you have nothing else to do other than send a check if you owe or a bank account for your refund. If you have extra information (more income, deductions, etc) - then you are free to fill out your own forms. As such, 60-70% of the population would have nothing to do. People with multiple part time jobs would be fine. The rest would still have more to do. So, at worse, it hasn't become worse, and it is better for the majority of people.
- chatmasta 8y ago
  What happens when the IRS gets it wrong and the impoverished recipient has nobody to review it for them? (Still I suppose that may be an improvement over the status quo)
  - elefanten 8y ago
    The truly impoverished recipient won't owe much in taxes to begin with.
    - chatmasta 8y ago
      Right, the IRS will actually owe the resident money, i.e. a refund. Trouble is, the IRS often has access to only a subset of deductions and/or circumstantial life information, so it’s likely they would undercalculate the refund owed to an impoverished resident. The status quo is that residents must either (a) do nothing and receive a fine, or (b) file their taxes, explicitly opting in to any refund programs they qualify for. Whereas the implication of this change would necessitate the impoverished resident to either (a) do nothing and likely miss an underreported refund, or (b) file their taxes, basically, explicitly opting into any refund programs that were missed. It basically hides the penalty of not filing in savings missed. It certainly changes the calculus of the question of morality. Which case is better for the impoverished resident? It’s not a simple question.
      - llukas 8y ago
scott_s 8y ago
Most people have boring taxes. For those people with interesting taxes, they can do them themselves or pay someone else to do them. For the exceptional cases, this is what they already do. Arguing against something that simplifies an act for most people by pointing out that it doesn't apply to everyone does not make sense to me. I think it's almost important to keep in mind that the IRS already does your taxes. If what they do significantly disagrees with what you do, you have problems. I would much prefer the IRS just sends me their work rather than me having to do it, then send it to them for checking.
- nightski 8y ago
  If you have boring taxes this isn't a problem anyways. It's extremely simple to file if all you have is a W2. It can be done in about 10-15 minutes without any special knowledge.
  - Spooky23 8y ago
    Many boring people don't know this -- people pay $500 to claim the earned income credit.
  - lern_too_spel 8y ago
    I have "boring" taxes with many stock transactions. This is not simple to file.
    - usaar333 8y ago
      Stock transactions make your taxes very not boring. Pub 550 (https://www.irs.gov/publications/p550 https://www.irs.gov/publications/p550) is one of the most complicated areas of personal income tax.
      - lern_too_spel 8y ago
        It is boring for the IRS's computers, which calculate everything the IRS needs to know automatically from the data sent by my brokerage firm.
Spooky23 8y ago
Think of it this way. There are about 125 million households in the US. 80% of those households obtain money via: W-2, Retirement (Social Security, 1099-r), bank interest via 1099, dividends or other investment income via 1099, contractor income via 1099 and similar. 13% of taxpayers can file a 1040EZ (aka simple enough to use a phone IVR) 100 million households can be freed of a needless administrative burden. Why not?
- ryandrake 8y ago
  Intuit and HR Block need to make profits. How can you be against corporate profits?
- hundt 8y ago
  First of all, no self-employed taxpayer ("contractor income via 1099") could have an accurate return prepared by the IRS because the IRS won't know their expenses. But secondly there's a lot more to taxes than just income. For example: - Filing status (married, head of household, etc.) - Education credits - Child credits - Personal exemptions (income adjustment reduced to zero, but you still need to calculate them to determine qualification for various things) These things affect most taxpayers and require information that is not reported to the IRS. The IRS could make "worst-case" assumptions (single, no kids, etc) thus requiring everyone to revise their returns, or they could guess and invite tax fraud and inadvertent errors. So that's a reason why not.
  - scott_s 8y ago
    So then you take what the IRS gives you, modify it with new information and send it back in. You’re arguing against having an easier starting point.
  - Spooky23 8y ago
    That's all data that the IRS either has already or can collect more simply. So, because 20 million households can't have a form auto-filled, we should forget about the other 100 million? The other upshot is that the expense and non-compliance from a tax perspective would probably drive more W-2 employees in situations where 1099 status is being abused. (ie. probably 40%)
svennek 8y ago
Sorry to pop your bubble, but... I live in Denmark, and all of the above use cases are automatically calculated by our tax auth.. My most complex tax-filing was: - Full-time job - Extra "non-job" salary (board membership) - Investment income from two different providers - Expenses for multiple bank loans and mortage, and external credit card companies - Three different companies (LLCs) that I own All of that info send to the IRS (by law) from all provider. My time for tax-filing 10 minutes to look it through (and do nothing as it was correct). This year I had 1 change to the taxes. The interest from a small collective loan for our home-owners association was not automatically filed, and I had to enter that by hand... Took 5 minutes.. Small note, my three companies also had my time spent doing tax stuff, but that is by law required of the LLCs and the companies have a (shared) accoutant doing that.. Other note. Even royalties (for books, music etc) are correctly calculated by the danish IRS due to the requirements of posting from the companies doing payouts.. tl;dr: The requirements of the payer and all financial institutes to file to the IRS is extremely effective...
dragonwriter 8y ago
> People working multiple part time jobs Multiple part-time jobs makes setting withholding allowances properly tricky, but doesn't substantially complicated year-end taxes, so, no, this isn't a valid point. > People with non-standard investment portfolios or real estate holdings People who derive income in a particular way from these Ina given year that isn't trivially applied given documents that are already required to be filed with the IRS would, yes, need to do some kind of filing addendum/adjustment. These are probably a very small share of returns each year. > Contractors, with or without an LLC Yes, anyone who has business income on their personal taxes rather than in a non-passthrough entity is going to have to do some kind of business addendum to an IRS-prepared personal return. > Dual residents Sure, these (or anyone with foreign tax to report) are going to need something on top of the base IRS return. > Small retail businesses; Small internet businesses; Megacorps This whole idea applies only to personal taxes; so many of these are out of scope ab initio. As far as small businesses that would be reported as personal income, that's already addressed. With IRS-prepared returns, everyone would have substantially less to do, and the vast majority of individual returns would be just review and approve.
s73v3r_ 8y ago
"There is basically one straight-forward case where the IRS preparing taxes makes sense: that of full time employees whose only income is from their job which issues W2s." And as it turns out, this is the vast majority of cases. Just because there are a few other cases where it doesn't work out does not justify not doing this.
- deleted 8y ago
  [deleted]
- hundt 8y ago
  Incorrect. Here are some numbers: https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-filing-status https://www.irs.gov/statistics/soi-tax-stats-individual-stat... They don't have this category exactly, but it is clear that that there are many more than "a few other cases" that are not full-time W-2 employees. For example, 25M returns in 2015 (17%) have no wage income at all and around 13% have self-employment income.

clarkevans 8y ago

Everyone else is, what 10% of filers? If you're in the 10% you'll know it and you'll do private preparation.

ghaff 8y ago
About 2/3rds of people do file a 1040 rather than a 1040A or 1040-EZ which at least suggests that most people do have taxes that are more complex than just just a W2 and a standard deduction.
- ghouse 8y ago
  Like a 1099? The government has this data as well.
- kevin_thibedeau 8y ago
  Most people are using tax prep services that will default to 1040 since their software doesn't care about which form is going to be used and it's simpler to code for just the general case.
teej 8y ago
Just back of the napkin, but there are 28 million small businesses and 130 million full time employed adults in the US. So no. It’s likely much higher than 10%.

debacle 8y ago

I mean the standard deduction is being raised substantially. That's going to make the amount of people hitting the limit far lower.

VikingCoder 8y ago

What makes it so hard for "People working multiple part time jobs"? "And that’s not even considering the moral hazard of misaligned incentives, i.e. the IRS has no incentive to make sure you deduct as much as legally possible from your return." This article isn't advocating that your taxes would be submitted without your review. It's advocating that they be PREPARED. As in prepared for further editing or review.

ebiester 8y ago

Think of it more as "The IRS has prepared this return for you. Look at it. If it's what you expect, you have nothing else to do other than send a check if you owe or a bank account for your refund. If you have extra information (more income, deductions, etc) - then you are free to fill out your own forms. As such, 60-70% of the population would have nothing to do. People with multiple part time jobs would be fine. The rest would still have more to do. So, at worse, it hasn't become worse, and it is better for the majority of people.

chatmasta 8y ago
What happens when the IRS gets it wrong and the impoverished recipient has nobody to review it for them? (Still I suppose that may be an improvement over the status quo)
- elefanten 8y ago
  The truly impoverished recipient won't owe much in taxes to begin with.
  - chatmasta 8y ago
    Right, the IRS will actually owe the resident money, i.e. a refund. Trouble is, the IRS often has access to only a subset of deductions and/or circumstantial life information, so it’s likely they would undercalculate the refund owed to an impoverished resident. The status quo is that residents must either (a) do nothing and receive a fine, or (b) file their taxes, explicitly opting in to any refund programs they qualify for. Whereas the implication of this change would necessitate the impoverished resident to either (a) do nothing and likely miss an underreported refund, or (b) file their taxes, basically, explicitly opting into any refund programs that were missed. It basically hides the penalty of not filing in savings missed. It certainly changes the calculus of the question of morality. Which case is better for the impoverished resident? It’s not a simple question.
    - llukas 8y ago

scott_s 8y ago

Most people have boring taxes. For those people with interesting taxes, they can do them themselves or pay someone else to do them. For the exceptional cases, this is what they already do. Arguing against something that simplifies an act for most people by pointing out that it doesn't apply to everyone does not make sense to me. I think it's almost important to keep in mind that the IRS already does your taxes. If what they do significantly disagrees with what you do, you have problems. I would much prefer the IRS just sends me their work rather than me having to do it, then send it to them for checking.

nightski 8y ago
If you have boring taxes this isn't a problem anyways. It's extremely simple to file if all you have is a W2. It can be done in about 10-15 minutes without any special knowledge.
- Spooky23 8y ago
  Many boring people don't know this -- people pay $500 to claim the earned income credit.
- lern_too_spel 8y ago
  I have "boring" taxes with many stock transactions. This is not simple to file.
  - usaar333 8y ago
    Stock transactions make your taxes very not boring. Pub 550 (https://www.irs.gov/publications/p550 https://www.irs.gov/publications/p550) is one of the most complicated areas of personal income tax.
    - lern_too_spel 8y ago
      It is boring for the IRS's computers, which calculate everything the IRS needs to know automatically from the data sent by my brokerage firm.

Spooky23 8y ago

Think of it this way. There are about 125 million households in the US. 80% of those households obtain money via: W-2, Retirement (Social Security, 1099-r), bank interest via 1099, dividends or other investment income via 1099, contractor income via 1099 and similar. 13% of taxpayers can file a 1040EZ (aka simple enough to use a phone IVR) 100 million households can be freed of a needless administrative burden. Why not?

ryandrake 8y ago
Intuit and HR Block need to make profits. How can you be against corporate profits?
hundt 8y ago
First of all, no self-employed taxpayer ("contractor income via 1099") could have an accurate return prepared by the IRS because the IRS won't know their expenses. But secondly there's a lot more to taxes than just income. For example: - Filing status (married, head of household, etc.) - Education credits - Child credits - Personal exemptions (income adjustment reduced to zero, but you still need to calculate them to determine qualification for various things) These things affect most taxpayers and require information that is not reported to the IRS. The IRS could make "worst-case" assumptions (single, no kids, etc) thus requiring everyone to revise their returns, or they could guess and invite tax fraud and inadvertent errors. So that's a reason why not.
- scott_s 8y ago
  So then you take what the IRS gives you, modify it with new information and send it back in. You’re arguing against having an easier starting point.
- Spooky23 8y ago
  That's all data that the IRS either has already or can collect more simply. So, because 20 million households can't have a form auto-filled, we should forget about the other 100 million? The other upshot is that the expense and non-compliance from a tax perspective would probably drive more W-2 employees in situations where 1099 status is being abused. (ie. probably 40%)

svennek 8y ago

Sorry to pop your bubble, but... I live in Denmark, and all of the above use cases are automatically calculated by our tax auth.. My most complex tax-filing was: - Full-time job - Extra "non-job" salary (board membership) - Investment income from two different providers - Expenses for multiple bank loans and mortage, and external credit card companies - Three different companies (LLCs) that I own All of that info send to the IRS (by law) from all provider. My time for tax-filing 10 minutes to look it through (and do nothing as it was correct). This year I had 1 change to the taxes. The interest from a small collective loan for our home-owners association was not automatically filed, and I had to enter that by hand... Took 5 minutes.. Small note, my three companies also had my time spent doing tax stuff, but that is by law required of the LLCs and the companies have a (shared) accoutant doing that.. Other note. Even royalties (for books, music etc) are correctly calculated by the danish IRS due to the requirements of posting from the companies doing payouts.. tl;dr: The requirements of the payer and all financial institutes to file to the IRS is extremely effective...

dragonwriter 8y ago

> People working multiple part time jobs Multiple part-time jobs makes setting withholding allowances properly tricky, but doesn't substantially complicated year-end taxes, so, no, this isn't a valid point. > People with non-standard investment portfolios or real estate holdings People who derive income in a particular way from these Ina given year that isn't trivially applied given documents that are already required to be filed with the IRS would, yes, need to do some kind of filing addendum/adjustment. These are probably a very small share of returns each year. > Contractors, with or without an LLC Yes, anyone who has business income on their personal taxes rather than in a non-passthrough entity is going to have to do some kind of business addendum to an IRS-prepared personal return. > Dual residents Sure, these (or anyone with foreign tax to report) are going to need something on top of the base IRS return. > Small retail businesses; Small internet businesses; Megacorps This whole idea applies only to personal taxes; so many of these are out of scope ab initio. As far as small businesses that would be reported as personal income, that's already addressed. With IRS-prepared returns, everyone would have substantially less to do, and the vast majority of individual returns would be just review and approve.

s73v3r_ 8y ago

"There is basically one straight-forward case where the IRS preparing taxes makes sense: that of full time employees whose only income is from their job which issues W2s." And as it turns out, this is the vast majority of cases. Just because there are a few other cases where it doesn't work out does not justify not doing this.

deleted 8y ago
[deleted]
hundt 8y ago
Incorrect. Here are some numbers: https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-filing-status https://www.irs.gov/statistics/soi-tax-stats-individual-stat... They don't have this category exactly, but it is clear that that there are many more than "a few other cases" that are not full-time W-2 employees. For example, 25M returns in 2015 (17%) have no wage income at all and around 13% have self-employment income.