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>"There's no reason the government couldn't just tell me how much money they took each year and give me a chance to contest it if I thought it was wrong." Behi

>"There's no reason the government couldn't just tell me how much money they took each year and give me a chance to contest it if I thought it was wrong." Behind the scenes, the IRS already has a well informed idea of how much you owe, based on the information submitted to them by your employer and a few select third parties - such as your bank or broker. The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status. For the majority of people who file using 1040-EZ, you're basically just confirming what the IRS already knows from its own data collection along with some possible adjustments. It would be possible for the IRS to collect even more information, but that does seem rather intrusive and unwelcome to most American's sensibilities.

ortusdux 4y ago
There have been several proposed bills that would create a pre-filled tax form system, but they always get quietly sidelined by tax industry lobbyists. I think a change in language would go a long way. The average American spends 13 hours and $200 per year to fill and file their taxes. This expense is itself a tax, albeit an indirect one. "This tax season, we want to save you money, and pre-filled tax forms will do just that." "The tax industry and their lobbyists fight tooth and nail to keep our tax code complex, and every year this costs you money. We want to fix that."
- bluGill 4y ago
  I've done my taxes by hand - pencil and paper (not even a calculator), and it was faster than filling in all the forms for the online tax software. I still use the software, because the last time I did things my hand I didn't transfer line 17a of form 2345b to line 28c of form 9876d and when that was caught it was a big hassle to correct (even though the IRS had the right numbers I still had to fill out an amended return and then send new forms to the state - the state of course had the right numbers too if they could be bothered to double check)
  - ortusdux 4y ago
    There is another good talking point: "You already pay the IRS to do your taxes each year. That is how we know if the forms you submit us are correct. You shouldn't have to pay twice!"
  - SoftTalker 4y ago
    Yeah really taxes could be much easier if you only had to submit what they don't already have. E.g. various deductions, non-W2 income, etc. They could then prep the final return and make it available for you to review and approve. All my problems with taxes over the years have amounted to similar mistakes - forgetting to transfer one amount from one form to another, or transposing numbers, etc.
  - pclmulqdq 4y ago
    IMO there are basically two types of tax filers in the US: 1. People who really should file with pencil and paper (or excel, at most) 2. People who need an accountant Very few people fall in between these categories. The tax code is so complicated and annoying that even things like employer RSUs, mortgages, side hustles, and doing more than 20 stock trades in a year can be risky and weird.
- hospitalJail 4y ago
  > but they always get quietly sidelined by tax industry lobbyists. Turbo tax has spent 44 million dollars on lobbying. The American Medical Association(Physicians) have spent 500 million dollars on lobbying. (All of medical spent about 2 billion) Its good that people are angry that lobbyists control the nation, but for some reason we give the biggest lobbyists a pass. I don't see the outrage against the top 20 lobbyists, I do (rightly) see it against turbotax.
  - ceejayoz 4y ago
    The medical industry is something like 20% of the economy. That’s not the case for the tax prep industry. Their lobbying is outsized, and able to be more narrowly focused on the couple things they really care about.
  - UncleMeat 4y ago
    The medical industry is squarely in the crosshairs of "most broken and fucked up industry in the country" pretty much constantly. I agree that we often don't consider all sorts of other lobbying, but "our medical industry is broken because of corporations" is a pretty uncontroversial statement in the US.
    - spoils19 4y ago
      > The medical industry is squarely in the crosshairs of "most broken and fucked up industry in the country" pretty much constantly. The problem is that you speak for others when they hold the opposing view - our medical industry is evidence of the free market working at its best, and providing care for dollars with no hidden or extraneous fees.
      - d4mi3n 4y ago
        I’d love to see a thorough breakdown of what that opposing stance is. How is medicine, a service that is non-negotiable (e.g. you can die without it) in a position to work without problems in a completely free market? I’m any free market, you vote with your wallet, but that’s impossible if you don’t have time to switch providers or if forces outside of the free market dictate price? I’d love for us to just say “let the market sort it out”, but that generally requires presumptions that aren’t universally true for all goods or services.
- houstonn 4y ago
  I don't get it. Are lobbyists in control of congress? Aren't politicians the ones who pass bills? Or not pass bills in this case.
  - xordon 4y ago
    > Are lobbyists in control of congress? Effectively, Yes. > Who passes bills? Technically the elected officials, but the bills themselves are usually written by lobbyists. Pressure from campaign donors, either directly or through lobbyists, or through "party" channels influence votes.
    - atlasunshrugged 4y ago
      I think usually is a stretch but some bills certainly are written by lobbyists (or think tanks/do tanks)
      - thayne 4y ago
        Even if they aren't written by Lobbyists I'd be surprised if most bills weren't influenced at least a little by at least one lobbyist group.
        atlasunshrugged 4y ago
        Hmm, probably depends on what you define as a lobbyist. If you're writing a bill about education reform and including more tech in the classroom (just a hypothetical example) and ask the teacher's union, Brookings, and a major education company about what would be important to include or not include, would that be influenced by a lobbyist group?
    - rdevsrex 4y ago
      Yet another reason I wish the US were a real democracy. For all the good that checks and balances do, let's not forget that the founders were trying to entrench the power of their class.
- tzs 4y ago
  > There have been several proposed bills that would create a pre-filled tax form system, but they always get quietly sidelined by tax industry lobbyists. Not just industry lobbyists. Another big part is Grover Norquist's "Americans for Tax Reform" and similar groups. They have a lot of influence with about half of Congress. Here's a PowerPoint presentation [1] Norquist presented to the President's Advisory Panel on Federal Tax Reform in 2005 explaining their opposition to free filing. It's short so I'll paste the text from each slide here, with the slide titles marked with dashes, so people don't have to find a copy of PowerPoint (or LibreOffice or Keynote, which also can open it fine). ---- Implementing a “Return-Free” Tax Filing Scheme Presentation to the President’s Advisory Panel on Federal Tax Reform Grover Norquist President Americans for Tax Reform May 17, 2005 ---- The Current System Tax filing is citizen-based – taxpayers tell the government what they earned and owe ---- Under Return-Free Tax filing would be government-based – the burden would be on the taxpayer to challenge the government’s findings -- essentially an audit of every single American taxpayer ---- The Fox Would Guard the Henhouse The same agency that collects taxes would be the tax preparer – the motivation to maximize revenue would dominate both ends of the process ---- Return-Free is a Tax Increase The true goal is to increase revenue. The government knows few taxpayers will challenge its findings ---- Taxes Should be Visible Doing taxes keeps citizens aware of the tax burden imposed upon them by the government. A Return-Free scheme would allow the government to raise revenues invisibly ---- The California Example The State would not guarantee the accuracy of the returns it prepared – the taxpayer was removed from the process, but left with the responsibility The pilot program achieved 50% less uptake than planned Comments by CA officials tell us that the true aim was increased revenue [1] http://govinfo.library.unt.edu/taxreformpanel/meetings/docs/norquist_05172005.ppt http://govinfo.library.unt.edu/taxreformpanel/meetings/docs/...
  - CrendKing 4y ago
    So much BS in these lines. For whatever record IRS already has on me, there is nothing my version of the filing can change. It's not like I can arbitrarily remove an 0 from my AGI and "challenge" IRS to accept my version. Then why demand me to repeat the duplicate information? "keeps citizens aware of the tax burden" - Sure if some people want to be aware, but I'm sure many people don't care about and can't reason about every tax change. Seriously, how many of you ever read a news about a new tax and "talked to your congress representative"? All these are just giant waste of time to majority of the population in the country.
- sidewndr46 4y ago
  Why legislate any of it? Just charge all 300+ million of US with tax evasion and allow everyone to enter a plea of no contest. The fine for this treachery can be to pay the exact amount of taxes I owe. No need for any laws to be changed anywhere. We can enter our plea via zoom call.
bluGill 4y ago
Even if the IRS doesn't know, for most people the difference between the right answer and the answer the IRS has despite missing some data isn't enough for either to worry about. My bank reports my stock trades, my company reports income. My state already collects mortgage information so it wouldn't be hard to send that on. Sure I could build a widget in my garage and not report taxes, but either I'm doing so little of this that it not worth the IRS's time, or I really need to become a real business and get an accountant to report this while dealing with the other complexities of finance.
- godelski 4y ago
  This has always been my viewpoint. It doesn't have to be perfect, nothing is. Everyone already "cheats" on their taxes by not reporting things like gifts which never reach the limits anyways. Or servers who take cash tips and don't report. We don't care about these things because they are so low value and honestly might be better for the economy if ignored. And as far as I see it, everything the Fed needs to file my taxes is information that the Fed already has. I'm pretty sure this is an extremely common circumstance. I also don't understand why states don't push for return free filing. They can demonstrate it working without the need for the Fed to take action, which in turn would put pressure on the Fed.
llbeansandrice 4y ago
1040-EZ hasn't existed since 2017. It's just the 1040 which has multiple schedules.
- kevin_thibedeau 4y ago
  The new 1040 is nearly identical to 1040EZ just split over two sheets.
godelski 4y ago
Aren't capital gains already reported from your bank? If not, it should be trivial to have them since they send the exact same information to me. The same goes for loans. Honestly I wouldn't be surprised if the IRS could already have a 90+% success rate for 80+% of people. It seems like the real issues would be in the very rich who can take advantage of many loopholes or the average person when big life events happen (things like death, marriage, and birth, though most of this could be automatically reported as well but easier to fall through the gaps). Maybe I misunderstand, but it doesn't seem like the IRS needs any additional information than I have presumed it already has. This information is at least all known by the fed, so it doesn't seem like a data leakage. And I'm someone that highly cares about privacy. I suspect that the real pushback for return free filing is from 1) tax filers like Turbo Tax who would lose a lot of business and 2) the ultra wealthy as RTF would put pressure to simplify the tax code and reduce the number of loopholes.
- BitwiseFool 4y ago
  Your bank will report interest via the 1099-INT, and they will do this if you make more than $10 per year. You will also get a form if you redeemed any government bonds. I'm not deeply familiar with AML/KYC, but transactions over $10,000 are reported to the government, but not necessarily to the IRS and definitely not as a taxable event. Let's say you sold your car and deposited the money in your account. The IRS won't have details about the sale and neither will your bank. They will know the amount, but it is incumbent on you to report information if this sale represented a capital gain. In all likelihood it wasn't, but the government doesn't have a way of knowing this. If you get audited, someone will probably ask where the money came from and it would be up to you to furnish receipts in order to prove it.
  - godelski 4y ago
    Honestly, I don't see a problem with this. Like every other country, they send you a bill. You either correct the mistake they have or pay a fine. Still easier and cheaper than paying TurboTax.
- hello639 4y ago
TulliusCicero 4y ago
> The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status. Two things: 1. A lot of asset sales should be or are reported by financial institutions, so in the case of me selling stock through Schwab or whatever, it should still be handle-able by the IRS. 2. Okay yes, it's reasonable for me to put in my living status changes or tax deductions I want to claim, but they don't ask just for that, they ask for all the other shit too, all the stuff they already know the answer to. Why?
- spullara 4y ago
  1. If the IRS handles it without reporting they assume that your sell LIFO for the worst possible capital gains treatment.
  - mywittyname 4y ago
    Vanguard gives me an option on how to treat capital gains for tax purposes.
  - sidlls 4y ago
    The brokerages permit election of the method and can easily be made to report that along with the other details
  - LiquidSky 4y ago
    In the theoretical new system, you could have an option to file additional elections or changes. The IRS would have a default that you could then vary if you chose.
  - TulliusCicero 4y ago
    And as long as it's just the default, who gives a shit? Besides, as others have pointed out, there are ways to specify at the time of the sale. That's what Schwab does when I sell stock there.
- ryandrake 4y ago
bombcar 4y ago
Here's how it should work! The IRS has a page, you can go look at it and say "eh ok" or you can click further and do whatever you think is important to update. And the tax companies can offer to do that "click further" for you, and you then would see how much they saved you (if any at all). Heck, make it so the IRS always charges a "I dun wanna read anything" fee of $50 that you can get out of by clicking "uh no" like the presidential one. That would satisfy most people, heh. Complex scenarios can still be handled by hand if the taxpayer wants.
LiquidSky 4y ago
>The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status. But that's exactly what the parent comment was saying: you'd get a notice from the IRS that says they think you owe $X based on their records. You have until the filing deadline to file any additional income/exemptions/deductions/challenges/etc. As you say, for the vast majority of people this would make taxes a million times easier. For people with more complex situations, they can then engage in the more complex process of additional filings.
stcredzero 4y ago
Behind the scenes, the IRS already has a well informed idea of how much you owe, based on the information submitted to them by your employer and a few select third parties - such as your bank or broker. I will corroborate, as I've posted elsewhere in this thread. I've had to interact with IRS employees, and they basically have all the information in their computer system. For simple returns, they could tell you the entire contents of it!
tshaddox 4y ago
> The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status. One could argue that a basic principle of liberalism ought to be that if the government wants to tax you they should be responsible for calculating how much you owe according to the law. Or in other words, for every dollar the government doesn't demonstrate that you legally owe, you should not owe that dollar. Kinda like presumption of innocence, but for taxes.
- kyleee 4y ago
  we really missed the boat not getting that in the constitution
  - tshaddox 4y ago
    I mean it kinda was in the United States one.
deleted 4y ago
[deleted]
MuffinFlavored 4y ago
> like capital gains tax on asset sales They know what you purchased your asset for + when and what + when you sold it for, don't they?
chiefalchemist 4y ago
Yes. But if you make a mistake and don't report something the IRS already knows about rhen you lose, and there's a penalty on top of that. It shouldn't have to be a game. There shouldn't be fear and antagonism. The current system favors the IRS. It favors other third-parties. And it's devoid of any favor for the taxpayers.
baby 4y ago
There are much bigger problems currently. For example, if you receive RSUs and don't sell some manually at vesting, you might end up in debt by being forced to take loans to pay your taxes.
teawrecks 4y ago
You just said the same thing with more words.
fire 4y ago
> you personally need to report additional information for things like capital gains tax on asset sales This part annoys me; when I would have RSU's vest, my broker would send me a 1095B(?) which plainly lists stock price at time of acquire and time of sale, and the gains, which for RSU's sold at time of vesting is 0 but for some reason I don't understand, they don't report the cost basis to the IRS, just the sale and price at time of acquire, so if you don't file your taxes to fill in that cost basis information, the IRS will cite you as having earned the entire sell cost of the stock! This fucks up a lot of people new to tech/taxes, and I still haven't been able to find documentation on why they don't file the cost basis for you if they're reporting the sale anyway.
- junar 4y ago
  The broker didn't report the cost basis to the IRS because they don't have to. They only have to do this for "covered securities" [1], which include stocks you buy with cash, but don't include stocks you acquire as employee compensation. [1] https://www.irs.gov/instructions/i1099b#idm139900428766768 https://www.irs.gov/instructions/i1099b#idm139900428766768
- junar 4y ago
  Also, it sounds like brokers are somewhat to blame, because they made comments to the IRS opposing additional reporting for stock compensation: > ... commenters asked that there be no change to the Form 1099-B to reflect compensation status or, alternatively, that using the indicator be permitted, but not required. These commenters indicated that compensation information is not accessible to most brokers, and extensive reprogramming for both the underlying database and the reporting process would be required. The commenters also expressed concerns that, in many situations, a broker would have to accept customer-provided information in order to track the compensation-related status. > The lack of a mechanism to communicate whether the basis of stock has been adjusted for the exercise of a compensatory option coupled with a system involving discretionary broker adjustments for compensatory options would, however, be unworkable. > A broker may not increase initial basis for income recognized upon the exercise of a compensatory option or the vesting or exercise of other equity-based compensation arrangements, granted or acquired on or after January 1, 2014. https://www.federalregister.gov/documents/2013/04/18/2013-09085/basis-reporting-by-securities-brokers-and-basis-determination-for-debt-instruments-and-options https://www.federalregister.gov/documents/2013/04/18/2013-09...
pclmulqdq 4y ago
The IRS system that generates CP-2000 letters has screwed up majorly every year that I have filed in the last 3 years. The IRS received 1099s in each year that my wife and I did not remember having issued for us, all for less than $5. What is crazy about the system is that every one of those years, I have been asked to pay the same amount of money (roughly $2000 extra), but the mistakes change each time. Each time, I have sent a very kind letter to the IRS telling them, "no, I did this correctly," and the IRS agreed. It failed to account for cost basis on RSUs from an employer. It failed to account for long-dated options expiring worthless. It failed to account for long term capital gains being long term. It's hard to avoid drawing the cynical conclusion here, that the IRS each time attempts to extract a payment that is slightly less than the cost of having a lawyer or accountant deal with them. I don't want this kind of system sending out a tax bill to me that I have to contest, because: 1. It will almost certainly not do the accounting that minimizes each person's burden. The US tax code is long and full of terrors. 2. Most people will just accept the result, regardless of the fact that it will cost them thousands in extra taxation. 3. People that don't accept the result will likely be flagged for future audits, and will likely face a lot more scrutiny. In the previous system where everyone has to file, there are a lot more targets. This is an utterly self-serving rationale, but I don't want this system.
- lukeschlather 4y ago
  What we need is an open, automated, auditable system where the rules are transparent. The IRS is not there to cheat you out of money, they have no incentive to do so (they don't get bonuses for that.) On the other hand, with our present adversarial system there are a variety of private businesses that do get money when the IRS makes mistakes.
  - pclmulqdq 4y ago
    I used to think that the IRS was not trying to cheat you out of money, and the individual employees are usually great if you return their calls and treat them with the minimum level of respect that they deserve. However, the systems at the IRS are designed to maximize revenue. The adversarial process that exists today (between you and the IRS's automated systems and processes, mediated by the humans at the IRS) allows you to generally get the benefit of being on the side that minimizes your tax burden. Usually, the more complicated your tax filing is, the more gray there is, and the more advantage you can take of it.
oblio 4y ago
> changes in your living arrangements or life status. These seem trivial to find out from other government agencies.

ortusdux 4y ago

There have been several proposed bills that would create a pre-filled tax form system, but they always get quietly sidelined by tax industry lobbyists. I think a change in language would go a long way. The average American spends 13 hours and $200 per year to fill and file their taxes. This expense is itself a tax, albeit an indirect one. "This tax season, we want to save you money, and pre-filled tax forms will do just that." "The tax industry and their lobbyists fight tooth and nail to keep our tax code complex, and every year this costs you money. We want to fix that."

bluGill 4y ago
I've done my taxes by hand - pencil and paper (not even a calculator), and it was faster than filling in all the forms for the online tax software. I still use the software, because the last time I did things my hand I didn't transfer line 17a of form 2345b to line 28c of form 9876d and when that was caught it was a big hassle to correct (even though the IRS had the right numbers I still had to fill out an amended return and then send new forms to the state - the state of course had the right numbers too if they could be bothered to double check)
- ortusdux 4y ago
  There is another good talking point: "You already pay the IRS to do your taxes each year. That is how we know if the forms you submit us are correct. You shouldn't have to pay twice!"
- SoftTalker 4y ago
  Yeah really taxes could be much easier if you only had to submit what they don't already have. E.g. various deductions, non-W2 income, etc. They could then prep the final return and make it available for you to review and approve. All my problems with taxes over the years have amounted to similar mistakes - forgetting to transfer one amount from one form to another, or transposing numbers, etc.
- pclmulqdq 4y ago
  IMO there are basically two types of tax filers in the US: 1. People who really should file with pencil and paper (or excel, at most) 2. People who need an accountant Very few people fall in between these categories. The tax code is so complicated and annoying that even things like employer RSUs, mortgages, side hustles, and doing more than 20 stock trades in a year can be risky and weird.
hospitalJail 4y ago
> but they always get quietly sidelined by tax industry lobbyists. Turbo tax has spent 44 million dollars on lobbying. The American Medical Association(Physicians) have spent 500 million dollars on lobbying. (All of medical spent about 2 billion) Its good that people are angry that lobbyists control the nation, but for some reason we give the biggest lobbyists a pass. I don't see the outrage against the top 20 lobbyists, I do (rightly) see it against turbotax.
- ceejayoz 4y ago
  The medical industry is something like 20% of the economy. That’s not the case for the tax prep industry. Their lobbying is outsized, and able to be more narrowly focused on the couple things they really care about.
- UncleMeat 4y ago
  The medical industry is squarely in the crosshairs of "most broken and fucked up industry in the country" pretty much constantly. I agree that we often don't consider all sorts of other lobbying, but "our medical industry is broken because of corporations" is a pretty uncontroversial statement in the US.
  - spoils19 4y ago
    > The medical industry is squarely in the crosshairs of "most broken and fucked up industry in the country" pretty much constantly. The problem is that you speak for others when they hold the opposing view - our medical industry is evidence of the free market working at its best, and providing care for dollars with no hidden or extraneous fees.
    - d4mi3n 4y ago
      I’d love to see a thorough breakdown of what that opposing stance is. How is medicine, a service that is non-negotiable (e.g. you can die without it) in a position to work without problems in a completely free market? I’m any free market, you vote with your wallet, but that’s impossible if you don’t have time to switch providers or if forces outside of the free market dictate price? I’d love for us to just say “let the market sort it out”, but that generally requires presumptions that aren’t universally true for all goods or services.
houstonn 4y ago
I don't get it. Are lobbyists in control of congress? Aren't politicians the ones who pass bills? Or not pass bills in this case.
- xordon 4y ago
  > Are lobbyists in control of congress? Effectively, Yes. > Who passes bills? Technically the elected officials, but the bills themselves are usually written by lobbyists. Pressure from campaign donors, either directly or through lobbyists, or through "party" channels influence votes.
  - atlasunshrugged 4y ago
    I think usually is a stretch but some bills certainly are written by lobbyists (or think tanks/do tanks)
    - thayne 4y ago
      Even if they aren't written by Lobbyists I'd be surprised if most bills weren't influenced at least a little by at least one lobbyist group.
      - atlasunshrugged 4y ago
        Hmm, probably depends on what you define as a lobbyist. If you're writing a bill about education reform and including more tech in the classroom (just a hypothetical example) and ask the teacher's union, Brookings, and a major education company about what would be important to include or not include, would that be influenced by a lobbyist group?
  - rdevsrex 4y ago
    Yet another reason I wish the US were a real democracy. For all the good that checks and balances do, let's not forget that the founders were trying to entrench the power of their class.
tzs 4y ago
> There have been several proposed bills that would create a pre-filled tax form system, but they always get quietly sidelined by tax industry lobbyists. Not just industry lobbyists. Another big part is Grover Norquist's "Americans for Tax Reform" and similar groups. They have a lot of influence with about half of Congress. Here's a PowerPoint presentation [1] Norquist presented to the President's Advisory Panel on Federal Tax Reform in 2005 explaining their opposition to free filing. It's short so I'll paste the text from each slide here, with the slide titles marked with dashes, so people don't have to find a copy of PowerPoint (or LibreOffice or Keynote, which also can open it fine). ---- Implementing a “Return-Free” Tax Filing Scheme Presentation to the President’s Advisory Panel on Federal Tax Reform Grover Norquist President Americans for Tax Reform May 17, 2005 ---- The Current System Tax filing is citizen-based – taxpayers tell the government what they earned and owe ---- Under Return-Free Tax filing would be government-based – the burden would be on the taxpayer to challenge the government’s findings -- essentially an audit of every single American taxpayer ---- The Fox Would Guard the Henhouse The same agency that collects taxes would be the tax preparer – the motivation to maximize revenue would dominate both ends of the process ---- Return-Free is a Tax Increase The true goal is to increase revenue. The government knows few taxpayers will challenge its findings ---- Taxes Should be Visible Doing taxes keeps citizens aware of the tax burden imposed upon them by the government. A Return-Free scheme would allow the government to raise revenues invisibly ---- The California Example The State would not guarantee the accuracy of the returns it prepared – the taxpayer was removed from the process, but left with the responsibility The pilot program achieved 50% less uptake than planned Comments by CA officials tell us that the true aim was increased revenue [1] http://govinfo.library.unt.edu/taxreformpanel/meetings/docs/norquist_05172005.ppt http://govinfo.library.unt.edu/taxreformpanel/meetings/docs/...
- CrendKing 4y ago
  So much BS in these lines. For whatever record IRS already has on me, there is nothing my version of the filing can change. It's not like I can arbitrarily remove an 0 from my AGI and "challenge" IRS to accept my version. Then why demand me to repeat the duplicate information? "keeps citizens aware of the tax burden" - Sure if some people want to be aware, but I'm sure many people don't care about and can't reason about every tax change. Seriously, how many of you ever read a news about a new tax and "talked to your congress representative"? All these are just giant waste of time to majority of the population in the country.
sidewndr46 4y ago
Why legislate any of it? Just charge all 300+ million of US with tax evasion and allow everyone to enter a plea of no contest. The fine for this treachery can be to pay the exact amount of taxes I owe. No need for any laws to be changed anywhere. We can enter our plea via zoom call.

bluGill 4y ago

Even if the IRS doesn't know, for most people the difference between the right answer and the answer the IRS has despite missing some data isn't enough for either to worry about. My bank reports my stock trades, my company reports income. My state already collects mortgage information so it wouldn't be hard to send that on. Sure I could build a widget in my garage and not report taxes, but either I'm doing so little of this that it not worth the IRS's time, or I really need to become a real business and get an accountant to report this while dealing with the other complexities of finance.

godelski 4y ago
This has always been my viewpoint. It doesn't have to be perfect, nothing is. Everyone already "cheats" on their taxes by not reporting things like gifts which never reach the limits anyways. Or servers who take cash tips and don't report. We don't care about these things because they are so low value and honestly might be better for the economy if ignored. And as far as I see it, everything the Fed needs to file my taxes is information that the Fed already has. I'm pretty sure this is an extremely common circumstance. I also don't understand why states don't push for return free filing. They can demonstrate it working without the need for the Fed to take action, which in turn would put pressure on the Fed.

llbeansandrice 4y ago

1040-EZ hasn't existed since 2017. It's just the 1040 which has multiple schedules.

kevin_thibedeau 4y ago
The new 1040 is nearly identical to 1040EZ just split over two sheets.

godelski 4y ago

Aren't capital gains already reported from your bank? If not, it should be trivial to have them since they send the exact same information to me. The same goes for loans. Honestly I wouldn't be surprised if the IRS could already have a 90+% success rate for 80+% of people. It seems like the real issues would be in the very rich who can take advantage of many loopholes or the average person when big life events happen (things like death, marriage, and birth, though most of this could be automatically reported as well but easier to fall through the gaps). Maybe I misunderstand, but it doesn't seem like the IRS needs any additional information than I have presumed it already has. This information is at least all known by the fed, so it doesn't seem like a data leakage. And I'm someone that highly cares about privacy. I suspect that the real pushback for return free filing is from 1) tax filers like Turbo Tax who would lose a lot of business and 2) the ultra wealthy as RTF would put pressure to simplify the tax code and reduce the number of loopholes.

BitwiseFool 4y ago
Your bank will report interest via the 1099-INT, and they will do this if you make more than $10 per year. You will also get a form if you redeemed any government bonds. I'm not deeply familiar with AML/KYC, but transactions over $10,000 are reported to the government, but not necessarily to the IRS and definitely not as a taxable event. Let's say you sold your car and deposited the money in your account. The IRS won't have details about the sale and neither will your bank. They will know the amount, but it is incumbent on you to report information if this sale represented a capital gain. In all likelihood it wasn't, but the government doesn't have a way of knowing this. If you get audited, someone will probably ask where the money came from and it would be up to you to furnish receipts in order to prove it.
- godelski 4y ago
  Honestly, I don't see a problem with this. Like every other country, they send you a bill. You either correct the mistake they have or pay a fine. Still easier and cheaper than paying TurboTax.
hello639 4y ago

TulliusCicero 4y ago

> The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status. Two things: 1. A lot of asset sales should be or are reported by financial institutions, so in the case of me selling stock through Schwab or whatever, it should still be handle-able by the IRS. 2. Okay yes, it's reasonable for me to put in my living status changes or tax deductions I want to claim, but they don't ask just for that, they ask for all the other shit too, all the stuff they already know the answer to. Why?

spullara 4y ago
1. If the IRS handles it without reporting they assume that your sell LIFO for the worst possible capital gains treatment.
- mywittyname 4y ago
  Vanguard gives me an option on how to treat capital gains for tax purposes.
- sidlls 4y ago
  The brokerages permit election of the method and can easily be made to report that along with the other details
- LiquidSky 4y ago
  In the theoretical new system, you could have an option to file additional elections or changes. The IRS would have a default that you could then vary if you chose.
- TulliusCicero 4y ago
  And as long as it's just the default, who gives a shit? Besides, as others have pointed out, there are ways to specify at the time of the sale. That's what Schwab does when I sell stock there.
ryandrake 4y ago

bombcar 4y ago

Here's how it should work! The IRS has a page, you can go look at it and say "eh ok" or you can click further and do whatever you think is important to update. And the tax companies can offer to do that "click further" for you, and you then would see how much they saved you (if any at all). Heck, make it so the IRS always charges a "I dun wanna read anything" fee of $50 that you can get out of by clicking "uh no" like the presidential one. That would satisfy most people, heh. Complex scenarios can still be handled by hand if the taxpayer wants.

LiquidSky 4y ago

>The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status. But that's exactly what the parent comment was saying: you'd get a notice from the IRS that says they think you owe $X based on their records. You have until the filing deadline to file any additional income/exemptions/deductions/challenges/etc. As you say, for the vast majority of people this would make taxes a million times easier. For people with more complex situations, they can then engage in the more complex process of additional filings.

stcredzero 4y ago

Behind the scenes, the IRS already has a well informed idea of how much you owe, based on the information submitted to them by your employer and a few select third parties - such as your bank or broker. I will corroborate, as I've posted elsewhere in this thread. I've had to interact with IRS employees, and they basically have all the information in their computer system. For simple returns, they could tell you the entire contents of it!

tshaddox 4y ago

> The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status. One could argue that a basic principle of liberalism ought to be that if the government wants to tax you they should be responsible for calculating how much you owe according to the law. Or in other words, for every dollar the government doesn't demonstrate that you legally owe, you should not owe that dollar. Kinda like presumption of innocence, but for taxes.

kyleee 4y ago
we really missed the boat not getting that in the constitution
- tshaddox 4y ago
  I mean it kinda was in the United States one.

deleted 4y ago

[deleted]

MuffinFlavored 4y ago

> like capital gains tax on asset sales They know what you purchased your asset for + when and what + when you sold it for, don't they?

chiefalchemist 4y ago

Yes. But if you make a mistake and don't report something the IRS already knows about rhen you lose, and there's a penalty on top of that. It shouldn't have to be a game. There shouldn't be fear and antagonism. The current system favors the IRS. It favors other third-parties. And it's devoid of any favor for the taxpayers.

baby 4y ago

There are much bigger problems currently. For example, if you receive RSUs and don't sell some manually at vesting, you might end up in debt by being forced to take loans to pay your taxes.

teawrecks 4y ago

You just said the same thing with more words.

fire 4y ago

> you personally need to report additional information for things like capital gains tax on asset sales This part annoys me; when I would have RSU's vest, my broker would send me a 1095B(?) which plainly lists stock price at time of acquire and time of sale, and the gains, which for RSU's sold at time of vesting is 0 but for some reason I don't understand, they don't report the cost basis to the IRS, just the sale and price at time of acquire, so if you don't file your taxes to fill in that cost basis information, the IRS will cite you as having earned the entire sell cost of the stock! This fucks up a lot of people new to tech/taxes, and I still haven't been able to find documentation on why they don't file the cost basis for you if they're reporting the sale anyway.

junar 4y ago
The broker didn't report the cost basis to the IRS because they don't have to. They only have to do this for "covered securities" [1], which include stocks you buy with cash, but don't include stocks you acquire as employee compensation. [1] https://www.irs.gov/instructions/i1099b#idm139900428766768 https://www.irs.gov/instructions/i1099b#idm139900428766768
junar 4y ago
Also, it sounds like brokers are somewhat to blame, because they made comments to the IRS opposing additional reporting for stock compensation: > ... commenters asked that there be no change to the Form 1099-B to reflect compensation status or, alternatively, that using the indicator be permitted, but not required. These commenters indicated that compensation information is not accessible to most brokers, and extensive reprogramming for both the underlying database and the reporting process would be required. The commenters also expressed concerns that, in many situations, a broker would have to accept customer-provided information in order to track the compensation-related status. > The lack of a mechanism to communicate whether the basis of stock has been adjusted for the exercise of a compensatory option coupled with a system involving discretionary broker adjustments for compensatory options would, however, be unworkable. > A broker may not increase initial basis for income recognized upon the exercise of a compensatory option or the vesting or exercise of other equity-based compensation arrangements, granted or acquired on or after January 1, 2014. https://www.federalregister.gov/documents/2013/04/18/2013-09085/basis-reporting-by-securities-brokers-and-basis-determination-for-debt-instruments-and-options https://www.federalregister.gov/documents/2013/04/18/2013-09...

pclmulqdq 4y ago

The IRS system that generates CP-2000 letters has screwed up majorly every year that I have filed in the last 3 years. The IRS received 1099s in each year that my wife and I did not remember having issued for us, all for less than $5. What is crazy about the system is that every one of those years, I have been asked to pay the same amount of money (roughly $2000 extra), but the mistakes change each time. Each time, I have sent a very kind letter to the IRS telling them, "no, I did this correctly," and the IRS agreed. It failed to account for cost basis on RSUs from an employer. It failed to account for long-dated options expiring worthless. It failed to account for long term capital gains being long term. It's hard to avoid drawing the cynical conclusion here, that the IRS each time attempts to extract a payment that is slightly less than the cost of having a lawyer or accountant deal with them. I don't want this kind of system sending out a tax bill to me that I have to contest, because: 1. It will almost certainly not do the accounting that minimizes each person's burden. The US tax code is long and full of terrors. 2. Most people will just accept the result, regardless of the fact that it will cost them thousands in extra taxation. 3. People that don't accept the result will likely be flagged for future audits, and will likely face a lot more scrutiny. In the previous system where everyone has to file, there are a lot more targets. This is an utterly self-serving rationale, but I don't want this system.

lukeschlather 4y ago
What we need is an open, automated, auditable system where the rules are transparent. The IRS is not there to cheat you out of money, they have no incentive to do so (they don't get bonuses for that.) On the other hand, with our present adversarial system there are a variety of private businesses that do get money when the IRS makes mistakes.
- pclmulqdq 4y ago
  I used to think that the IRS was not trying to cheat you out of money, and the individual employees are usually great if you return their calls and treat them with the minimum level of respect that they deserve. However, the systems at the IRS are designed to maximize revenue. The adversarial process that exists today (between you and the IRS's automated systems and processes, mediated by the humans at the IRS) allows you to generally get the benefit of being on the side that minimizes your tax burden. Usually, the more complicated your tax filing is, the more gray there is, and the more advantage you can take of it.

oblio 4y ago

> changes in your living arrangements or life status. These seem trivial to find out from other government agencies.