4 ms·

The US has the most idiotic tax system. Your employer, your mutual funds, your 401k, your bank -- everyone reports what you make to the government. The govern

The US has the most idiotic tax system. Your employer, your mutual funds, your 401k, your bank -- everyone reports what you make to the government. The government already knows what you owe (excluding those that itemize). They should just print out a summary and hand over a bill / refund.

ivm 8y ago
Recently I was filing my taxes in Chile for the first time and it took about 10 minutes because the tax service already knows most of my activities, including stock purchases via a local broker and dividends from them. I only needed to review the form for correctness and press "send".
conanbatt 8y ago
This is not done because the IRS doesn't have the power to enforce its tax system, and if it reported the information it had to the people, the people could know they can slip away with not paying anything that wasnt properly reported. First, a transparent system of the IRS would lower revenue. Second, the deductibles system is very complex for the IRS to pre-calculate it, so they are unable to do it.
- wl 8y ago
  Especially with the tax reform, most folks will be taking the standard deduction. Making the common case easy is still worth pursuing, even if some people will still itemize.
- basseq 8y ago
  You didn't cover the most important—and political—reason: it would delay refunds. 2019 deadlines for 1099-INT/DIV (i.e., the forms you get from your bank or brokerage) are April 1st. The IRS filing window opened January 29, with 90% of tax returns processed within 21 days. Since the IRS can't reliably pre-populate a tax return without all the required information, it would delay filing (and refunds) by 8 weeks. As the tax refund check is the largest check many Americans receive every year, delaying that payout gets taxpayer advocacy groups up in arms and is tantamount to political suicide. Incidentally, this same gap is where a bulk of tax return fraud happens—equalling billions of dollars. In short, if you file return before the IRS has all the information to validate that return is indeed correct, they'll usually shrug and accept it. By the time they get all the information they need, you've cashed out your refund debit card and are long gone. I haven't seen any analysis that such a system would lower revenues (indeed, it would stop billions of dollars of fraud and tax evasion), or that the deductible system is too complex.
  - kelnos 8y ago
    > In short, if you file return before the IRS has all the information to validate that return is indeed correct, they'll usually shrug and accept it. By the time they get all the information they need, you've cashed out your refund debit card and are long gone. This doesn't really pass the smell test for me. The IRS has, what, 7 years(?) to audit your tax return. They can and will do so, and will send you a bill, with penalties and interest included. (Source: this has happened to me, around a mistake I made with self-employment tax the first year I had non-W2 income.) Not sure how you'd be "long gone", either, unless you're not a US citizen and have since moved out of the US.
    - basseq 8y ago
      That's correct, albeit more nuanced than I was getting. My point is that they'll "shrug", accept your return, and issue you a refund. Yes, they may come back later and say, "Actually..." When I say, "you're long gone", I'm referring specifically to taxpayer identification fraud, where you'd file a (fraudulent) return on behalf of someone else (often a dead person or someone from Puerto Rico[1]), receive their refund in the form of a debit card, and "disappear". In any case, it's way easier to avoid paying someone in the first place than try and claw it back later. [1] https://www.irs.gov/taxtopics/tc901 https://www.irs.gov/taxtopics/tc901
    - basseq 8y ago
      Other note that I like to make just because it's interesting: actual audits by the IRS are very rare. They send a good number of collection letter every year, and the collection rate on those letter is very, very good. But those collection letters are categorically not audits, and more "friendly reminders". (Such that any letter on IRS letterhead could be considered friendly!)
  - thfuran 8y ago
    >The IRS can't reliably pre-populate a tax return without all the required information Neither can I.
    - 8y ago
sametmax 8y ago
Which many countries do already. In France, before this year, if you were an employee, you rarely filled a tax form, you just validated a prefilled one, usually with one click on the internet. Now it's just taken every month from your salary, and you get a chance to correct it once a year.
- mcv 8y ago
  Many countries do this, because in those countries, the government actually represents the interests of people. If there was ever a clear case of the US government putting the needs of businesses before the needs of the people, it's this: keep taxes as complex as possible in order to create business opportunities to sell products to make it easier again. It's a complete bullshit business that shouldn't be necessary at all. It exists only by the grace of an incomprehensible tax code.
  - newsgremlin 8y ago
    Wouldn't generalise that much in saying my government (UK) is truly representative more than the US, but in the US in general, it seems that whatever business exists there has to be something for the middleman.
    - taurath 8y ago
      Also whatever government function exists must be open to a middleman to take their profit out of it. The US is optimizing for businesses and investors, not citizens.
  - sametmax 8y ago
    I wouldn't call the french tax system simple or made to be easily understood. Here is the code for income taxes : https://github.com/GouvernementFR/calculette-impots-m-source-code https://github.com/GouvernementFR/calculette-impots-m-source... But I agree the french gov is less into business.
tathougies 8y ago
No they don't. There's a gazillion things you could do or claim to lower your tax bill. Moreover, if you set up all yoyr withholdings correctly then you do not need to file anything. You only need to file if you owe (ie you set up withholding wrong) or want yoyr money back (ie your withholding was wrong)
- nwah1 8y ago
  That's the problem. There shouldn't be a gazillion things, and the fact that there are is a major reason why rich, savvy, and unscrupulous people are able to game the system while average people pay full freight.
  - tathougies 8y ago
    TFW you learn it's unscrupulous to read the tax code
    - nwah1 8y ago
      The three adjectives I mentioned are all independent variables that each afford more tax advantage.
- kyrieeschaton 8y ago
  That is not true. You're generally required to file a tax return if your income is over 12K, depending on your filing status and various other rules, regardless of if you owe money or are owed a refund. https://www.forbes.com/sites/kellyphillipserb/2019/01/30/do-you-need-to-file-a-tax-return-in-2019/#4d26c5186106 https://www.forbes.com/sites/kellyphillipserb/2019/01/30/do-...

ivm 8y ago

Recently I was filing my taxes in Chile for the first time and it took about 10 minutes because the tax service already knows most of my activities, including stock purchases via a local broker and dividends from them. I only needed to review the form for correctness and press "send".

conanbatt 8y ago

This is not done because the IRS doesn't have the power to enforce its tax system, and if it reported the information it had to the people, the people could know they can slip away with not paying anything that wasnt properly reported. First, a transparent system of the IRS would lower revenue. Second, the deductibles system is very complex for the IRS to pre-calculate it, so they are unable to do it.

wl 8y ago
Especially with the tax reform, most folks will be taking the standard deduction. Making the common case easy is still worth pursuing, even if some people will still itemize.
basseq 8y ago
You didn't cover the most important—and political—reason: it would delay refunds. 2019 deadlines for 1099-INT/DIV (i.e., the forms you get from your bank or brokerage) are April 1st. The IRS filing window opened January 29, with 90% of tax returns processed within 21 days. Since the IRS can't reliably pre-populate a tax return without all the required information, it would delay filing (and refunds) by 8 weeks. As the tax refund check is the largest check many Americans receive every year, delaying that payout gets taxpayer advocacy groups up in arms and is tantamount to political suicide. Incidentally, this same gap is where a bulk of tax return fraud happens—equalling billions of dollars. In short, if you file return before the IRS has all the information to validate that return is indeed correct, they'll usually shrug and accept it. By the time they get all the information they need, you've cashed out your refund debit card and are long gone. I haven't seen any analysis that such a system would lower revenues (indeed, it would stop billions of dollars of fraud and tax evasion), or that the deductible system is too complex.
- kelnos 8y ago
  > In short, if you file return before the IRS has all the information to validate that return is indeed correct, they'll usually shrug and accept it. By the time they get all the information they need, you've cashed out your refund debit card and are long gone. This doesn't really pass the smell test for me. The IRS has, what, 7 years(?) to audit your tax return. They can and will do so, and will send you a bill, with penalties and interest included. (Source: this has happened to me, around a mistake I made with self-employment tax the first year I had non-W2 income.) Not sure how you'd be "long gone", either, unless you're not a US citizen and have since moved out of the US.
  - basseq 8y ago
    That's correct, albeit more nuanced than I was getting. My point is that they'll "shrug", accept your return, and issue you a refund. Yes, they may come back later and say, "Actually..." When I say, "you're long gone", I'm referring specifically to taxpayer identification fraud, where you'd file a (fraudulent) return on behalf of someone else (often a dead person or someone from Puerto Rico[1]), receive their refund in the form of a debit card, and "disappear". In any case, it's way easier to avoid paying someone in the first place than try and claw it back later. [1] https://www.irs.gov/taxtopics/tc901 https://www.irs.gov/taxtopics/tc901
  - basseq 8y ago
    Other note that I like to make just because it's interesting: actual audits by the IRS are very rare. They send a good number of collection letter every year, and the collection rate on those letter is very, very good. But those collection letters are categorically not audits, and more "friendly reminders". (Such that any letter on IRS letterhead could be considered friendly!)
- thfuran 8y ago
  >The IRS can't reliably pre-populate a tax return without all the required information Neither can I.
  - 8y ago

sametmax 8y ago

Which many countries do already. In France, before this year, if you were an employee, you rarely filled a tax form, you just validated a prefilled one, usually with one click on the internet. Now it's just taken every month from your salary, and you get a chance to correct it once a year.

mcv 8y ago
Many countries do this, because in those countries, the government actually represents the interests of people. If there was ever a clear case of the US government putting the needs of businesses before the needs of the people, it's this: keep taxes as complex as possible in order to create business opportunities to sell products to make it easier again. It's a complete bullshit business that shouldn't be necessary at all. It exists only by the grace of an incomprehensible tax code.
- newsgremlin 8y ago
  Wouldn't generalise that much in saying my government (UK) is truly representative more than the US, but in the US in general, it seems that whatever business exists there has to be something for the middleman.
  - taurath 8y ago
    Also whatever government function exists must be open to a middleman to take their profit out of it. The US is optimizing for businesses and investors, not citizens.
- sametmax 8y ago
  I wouldn't call the french tax system simple or made to be easily understood. Here is the code for income taxes : https://github.com/GouvernementFR/calculette-impots-m-source-code https://github.com/GouvernementFR/calculette-impots-m-source... But I agree the french gov is less into business.

tathougies 8y ago

No they don't. There's a gazillion things you could do or claim to lower your tax bill. Moreover, if you set up all yoyr withholdings correctly then you do not need to file anything. You only need to file if you owe (ie you set up withholding wrong) or want yoyr money back (ie your withholding was wrong)

nwah1 8y ago
That's the problem. There shouldn't be a gazillion things, and the fact that there are is a major reason why rich, savvy, and unscrupulous people are able to game the system while average people pay full freight.
- tathougies 8y ago
  TFW you learn it's unscrupulous to read the tax code
  - nwah1 8y ago
    The three adjectives I mentioned are all independent variables that each afford more tax advantage.
kyrieeschaton 8y ago
That is not true. You're generally required to file a tax return if your income is over 12K, depending on your filing status and various other rules, regardless of if you owe money or are owed a refund. https://www.forbes.com/sites/kellyphillipserb/2019/01/30/do-you-need-to-file-a-tax-return-in-2019/#4d26c5186106 https://www.forbes.com/sites/kellyphillipserb/2019/01/30/do-...