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Something I never understood about us taxes - from reading discussions online, it seems like everyone needs to file taxes at the end of every year? Here it's on

Something I never understood about us taxes - from reading discussions online, it seems like everyone needs to file taxes at the end of every year? Here it's only self employed, or people with rental or investment income. In a normal employer-employee relationship, the employer has to take care of it for you, they deduct taxes before sending the money to your account. This seems to be the way it works in most places, but not the us?

colejohnson66 6y ago
Correct. Companies like Intuit lobby the government to keep complex tax codes so they can provide services that make it easy.
- nightski 6y ago
  While that may be true, the reality is a lot of the complexity comes from deductions to handle people's "special" situations and needs.
- astrea 6y ago
  They don't lobby to make the tax code itself more complex, they just lobby to be the only providers of such services: https://www.propublica.org/article/inside-turbotax-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free https://www.propublica.org/article/inside-turbotax-20-year-f...
- mumblemumble 6y ago
  It's not quite that simple. There's a lot of popular political support for things that make a simpler tax season impossible, too. For example, the existence of tax-advantaged savings vehicles such as IRAs and HSAs mean that the taxable portion of your income isn't settled until the deadline for making contributions for that tax year. Which is April 15. But I imagine there would be a lot of popular political backlash if Congress were to abolish IRAs in the name of sticking it to Intuit. There's also that whole mess of expenditures that you can deduct from your taxable income, which doesn't kick in until the total of your deductible expenses exceeds the standard deduction. And a lot of people were worried when the standard deduction got increased a few years ago. It made a lot of people's taxes nominally easier to calculate, but people were worried that it might remove an incentive for charitable donations, or reduce the largess that the government gives to homeowners relative to renters, or alter the impact of tax incentives for people who put solar panels on their roofs, or whatever. Long story short, we love to blame Intuit, and it is true that Intuit generally wants a nasty complicated tax code, but it's also true that, in the aggregate, so does America.
  - colejohnson66 6y ago
    Yes, but for things where all you have is a W-2, the IRS could easily do your taxes for you. They could send everyone a letter saying, “based on what we have, these are your numbers. If you want to change what we know, feel free to file yourself or with something like TurboTax.” Then you get the best of both worlds: people with simple taxes don’t have to deal with it, and people with complex situations can keep doing what they’re doing. The (previous) existence of the 1040EZ showed that a lot of people have simple returns that the IRS could do for them.
  - philjohn 6y ago
    The UK has ISA's which are tax efficient savings vehicles and manage just fine. You only file a tax return if you earn over £100k That's partly because banks send all of their information to HMRC.
  - a_c_s 6y ago
    This is making mountains out of mole hills though: these types of problems can be solved without abolishing tax-deductible accounts. For example, one could tweak the deadline for contributions to those accounts to be say March 1, make the financial institutions report to the IRS by March 15th, send everyone their estimate on April 1st and have a deadline of April 15th to confirm or adjust their tax filing. Most of the big things that involve deductions are already tied to a financial institution that already report to the IRS.
- missedthecue 6y ago
  It's not like Turbo Tax is the only thing standing between you and not having to do your own taxes. The entire system top down would need to be redesigned and the withholdings concept done away with. That'd be such a sweeping piece of legislation it will most assuredly never happen.
MeinBlutIstBlau 6y ago
A swedish guy I go to school had to file taxes...while not generating any income or allowed to generate income. He almost got in trouble with whatever US dept handles immigrants cause his advisor in the foreign affairs office didn't tell him this.
mr_tristan 6y ago
Yes. And Intuit's lobbying has helped ensure that never changes. https://www.propublica.org/article/inside-turbotax-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free https://www.propublica.org/article/inside-turbotax-20-year-f... Most Americans are simply unaware that other countries have dramatically simplified this problem. It's amazing how many have magically assumed this was because this was some socialist concept and the immediately launch into "oh, but how much more in taxes are you paying? pfff."
bobbylarrybobby 6y ago
Technically you only need to file if you owe the government money. If you have money deducted from your paycheck, you will want to file in order to get a refund, but technically you don’t have to.
- astrea 6y ago
  This is not entirely true. You have to file if your income is above a certain amount for your age and filing status. If you owe or get a refund from the federal or state government is entirely dependent on your tax obligation and the amount withheld from your paychecks throughout the year.
- atombender 6y ago
  This is incorrect. You have to file a federal tax return if your income is above the standard deduction, and there are other rules [1]. Anyone can use this IRS page [2] to determine if they are required to file a tax return. [1] https://www.investopedia.com/ask/answers/07/taxtipfederal.asp https://www.investopedia.com/ask/answers/07/taxtipfederal.as... [2] https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return
Muromec 6y ago
Returns. It's about returns. And taxes that are not wage-tax already payed at source.
ploxiln 6y ago
Employers do withhold some income for federal and state taxes, and for social-security and some other odds and ends. But the tax system is very complicated, with multiple tax brackets (income above a threshold is taxed at a higher rate), deductions, exemptions, exceptions, alternative-minimum, and more. There are deductions and exceptions for things like mortgage payments that go to interest (on only one residential property), donations to certified charities up to a limit, green energy incentives, travel to start a new job, who knows what. So, we have to settle-up with lots of complicated forms each year, and I've tried alternatives to Turbo Tax, but didn't have enough confidence with the alternative's handling of all the complexity, they just were noticeably worse at handling all the complex details. Not that I like Turbo Tax or the overall situation, but for me it's either Turbo Tax or pay a more expensive accountant.
mumblemumble 6y ago
The USA has payroll deduction, but the tax code is complicated enough that that's only a rough estimate of what you actually owe. What you actually owe cannot be determined and deducted ahead of time, because a person's true tax obligation depends on information and events that may not be available until up to ~105 days after the end of the tax year. So, every year, you have to do a bunch of paperwork (it took me over 4 hours this year) to calculate your actual tax obligation, and then either you send the government a check or they send you a check to settle the difference.
- ghaff 6y ago
  And/or you may be on the hook for paying estimated taxes over the course of the next tax year.
BugsJustFindMe 6y ago
The US's system of tax deductions makes it impossible for your employer to know how much to remove from your paycheck except in the simplest of scenarios. They may not know how many children you have or how much money your spouse makes if you file jointly or how much you pay in rent or whether you're a first-time home buyer or what your deductible medical expenses were for the year or whether you had education expenses and so on...
- jcranmer 6y ago
  There is literally a form you fill out for your employer to tell them this information so they how to much withhold from your paycheck: https://www.irs.gov/pub/irs-pdf/fw4.pdf https://www.irs.gov/pub/irs-pdf/fw4.pdf
  - ghaff 6y ago
    A W-4 is an input into a formula that tells the employer how much you want deducted. So a couple with 3 dependent children and a mortgage will put down more deductions than a childless couple with no mortgage. But it's just to get you in the ballpark so you don't seriously overpay or underpay.
  - BugsJustFindMe 6y ago
    W4s are optional, have to be done in advance, and ask you to guess. Doing it at the end without guessing is called filing your tax returns.
- deleted 6y ago
  [deleted]
d1zzy 6y ago
The employer tax withholding does not account for any other source of income you may have (sell stocks, rental income, make money on Twitch/Youtube/ebay/etc, withdrawal from tax free investment, interest, etc) so you may need to pay more taxes than they withheld and at the same time it doesn't account for all the possible deductions you may have that year so it may withhold more than you need to pay (usually that's the "desired" case). So at the end of each year you need to go through all the income sources of that year, subtract all deductions and compute how much actual tax you own. And pay or receive the difference to/from IRS. Even if you have an extremely simple income situation (only one wage, no other income), depending on the state you live in you may still qualify for deductions that the employer is not aware of so it can be in your advantage to do the taxes.
jccooper 6y ago
Employers do witholding the US. Filing at the end of the year is doing a calculation to determine if the withholding is correct and if you owe extra or are due a refund. The factors determining total liability aren't simple enough that paycheck withholding can be entirely accurate.
asdf333 6y ago
yes its a colossal waste of time that could be spent on more productive things (or with family and friends)

colejohnson66 6y ago

Correct. Companies like Intuit lobby the government to keep complex tax codes so they can provide services that make it easy.

nightski 6y ago
While that may be true, the reality is a lot of the complexity comes from deductions to handle people's "special" situations and needs.
astrea 6y ago
They don't lobby to make the tax code itself more complex, they just lobby to be the only providers of such services: https://www.propublica.org/article/inside-turbotax-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free https://www.propublica.org/article/inside-turbotax-20-year-f...
mumblemumble 6y ago
It's not quite that simple. There's a lot of popular political support for things that make a simpler tax season impossible, too. For example, the existence of tax-advantaged savings vehicles such as IRAs and HSAs mean that the taxable portion of your income isn't settled until the deadline for making contributions for that tax year. Which is April 15. But I imagine there would be a lot of popular political backlash if Congress were to abolish IRAs in the name of sticking it to Intuit. There's also that whole mess of expenditures that you can deduct from your taxable income, which doesn't kick in until the total of your deductible expenses exceeds the standard deduction. And a lot of people were worried when the standard deduction got increased a few years ago. It made a lot of people's taxes nominally easier to calculate, but people were worried that it might remove an incentive for charitable donations, or reduce the largess that the government gives to homeowners relative to renters, or alter the impact of tax incentives for people who put solar panels on their roofs, or whatever. Long story short, we love to blame Intuit, and it is true that Intuit generally wants a nasty complicated tax code, but it's also true that, in the aggregate, so does America.
- colejohnson66 6y ago
  Yes, but for things where all you have is a W-2, the IRS could easily do your taxes for you. They could send everyone a letter saying, “based on what we have, these are your numbers. If you want to change what we know, feel free to file yourself or with something like TurboTax.” Then you get the best of both worlds: people with simple taxes don’t have to deal with it, and people with complex situations can keep doing what they’re doing. The (previous) existence of the 1040EZ showed that a lot of people have simple returns that the IRS could do for them.
- philjohn 6y ago
  The UK has ISA's which are tax efficient savings vehicles and manage just fine. You only file a tax return if you earn over £100k That's partly because banks send all of their information to HMRC.
- a_c_s 6y ago
  This is making mountains out of mole hills though: these types of problems can be solved without abolishing tax-deductible accounts. For example, one could tweak the deadline for contributions to those accounts to be say March 1, make the financial institutions report to the IRS by March 15th, send everyone their estimate on April 1st and have a deadline of April 15th to confirm or adjust their tax filing. Most of the big things that involve deductions are already tied to a financial institution that already report to the IRS.
missedthecue 6y ago
It's not like Turbo Tax is the only thing standing between you and not having to do your own taxes. The entire system top down would need to be redesigned and the withholdings concept done away with. That'd be such a sweeping piece of legislation it will most assuredly never happen.

MeinBlutIstBlau 6y ago

A swedish guy I go to school had to file taxes...while not generating any income or allowed to generate income. He almost got in trouble with whatever US dept handles immigrants cause his advisor in the foreign affairs office didn't tell him this.

mr_tristan 6y ago

Yes. And Intuit's lobbying has helped ensure that never changes. https://www.propublica.org/article/inside-turbotax-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free https://www.propublica.org/article/inside-turbotax-20-year-f... Most Americans are simply unaware that other countries have dramatically simplified this problem. It's amazing how many have magically assumed this was because this was some socialist concept and the immediately launch into "oh, but how much more in taxes are you paying? pfff."

bobbylarrybobby 6y ago

Technically you only need to file if you owe the government money. If you have money deducted from your paycheck, you will want to file in order to get a refund, but technically you don’t have to.

astrea 6y ago
This is not entirely true. You have to file if your income is above a certain amount for your age and filing status. If you owe or get a refund from the federal or state government is entirely dependent on your tax obligation and the amount withheld from your paychecks throughout the year.
atombender 6y ago
This is incorrect. You have to file a federal tax return if your income is above the standard deduction, and there are other rules [1]. Anyone can use this IRS page [2] to determine if they are required to file a tax return. [1] https://www.investopedia.com/ask/answers/07/taxtipfederal.asp https://www.investopedia.com/ask/answers/07/taxtipfederal.as... [2] https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return

Muromec 6y ago

Returns. It's about returns. And taxes that are not wage-tax already payed at source.

ploxiln 6y ago

Employers do withhold some income for federal and state taxes, and for social-security and some other odds and ends. But the tax system is very complicated, with multiple tax brackets (income above a threshold is taxed at a higher rate), deductions, exemptions, exceptions, alternative-minimum, and more. There are deductions and exceptions for things like mortgage payments that go to interest (on only one residential property), donations to certified charities up to a limit, green energy incentives, travel to start a new job, who knows what. So, we have to settle-up with lots of complicated forms each year, and I've tried alternatives to Turbo Tax, but didn't have enough confidence with the alternative's handling of all the complexity, they just were noticeably worse at handling all the complex details. Not that I like Turbo Tax or the overall situation, but for me it's either Turbo Tax or pay a more expensive accountant.

mumblemumble 6y ago

The USA has payroll deduction, but the tax code is complicated enough that that's only a rough estimate of what you actually owe. What you actually owe cannot be determined and deducted ahead of time, because a person's true tax obligation depends on information and events that may not be available until up to ~105 days after the end of the tax year. So, every year, you have to do a bunch of paperwork (it took me over 4 hours this year) to calculate your actual tax obligation, and then either you send the government a check or they send you a check to settle the difference.

ghaff 6y ago
And/or you may be on the hook for paying estimated taxes over the course of the next tax year.

BugsJustFindMe 6y ago

The US's system of tax deductions makes it impossible for your employer to know how much to remove from your paycheck except in the simplest of scenarios. They may not know how many children you have or how much money your spouse makes if you file jointly or how much you pay in rent or whether you're a first-time home buyer or what your deductible medical expenses were for the year or whether you had education expenses and so on...

jcranmer 6y ago
There is literally a form you fill out for your employer to tell them this information so they how to much withhold from your paycheck: https://www.irs.gov/pub/irs-pdf/fw4.pdf https://www.irs.gov/pub/irs-pdf/fw4.pdf
- ghaff 6y ago
  A W-4 is an input into a formula that tells the employer how much you want deducted. So a couple with 3 dependent children and a mortgage will put down more deductions than a childless couple with no mortgage. But it's just to get you in the ballpark so you don't seriously overpay or underpay.
- BugsJustFindMe 6y ago
  W4s are optional, have to be done in advance, and ask you to guess. Doing it at the end without guessing is called filing your tax returns.
deleted 6y ago
[deleted]

d1zzy 6y ago

The employer tax withholding does not account for any other source of income you may have (sell stocks, rental income, make money on Twitch/Youtube/ebay/etc, withdrawal from tax free investment, interest, etc) so you may need to pay more taxes than they withheld and at the same time it doesn't account for all the possible deductions you may have that year so it may withhold more than you need to pay (usually that's the "desired" case). So at the end of each year you need to go through all the income sources of that year, subtract all deductions and compute how much actual tax you own. And pay or receive the difference to/from IRS. Even if you have an extremely simple income situation (only one wage, no other income), depending on the state you live in you may still qualify for deductions that the employer is not aware of so it can be in your advantage to do the taxes.

jccooper 6y ago

Employers do witholding the US. Filing at the end of the year is doing a calculation to determine if the withholding is correct and if you owe extra or are due a refund. The factors determining total liability aren't simple enough that paycheck withholding can be entirely accurate.

asdf333 6y ago

yes its a colossal waste of time that could be spent on more productive things (or with family and friends)