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> the consequences for a mistake can be so great In my (admittedly limited, personal) experience, the consequences are not so great. They send you a letter let

> the consequences for a mistake can be so great In my (admittedly limited, personal) experience, the consequences are not so great. They send you a letter letting you know what the mistake was, and how to fix it. And then you fix it. The IRS isn't out to punish you, they just want what they're owed. Playing it up like screwing up your taxes will get you the death penalty is a myth perpetrated by the tax prep lobby.

bombcar 4y ago
In 80% of the cases where you mess up AND they notice they just send you a form saying “here’s our numbers” and you can say ok or complain. They’ve even done that to me when I made a mistake that resulted in a smaller refund; they sent the “you fucked up” letter along with a check.
- jonathankoren 4y ago
  Same. Every time I got the EIC, I never understood why, but the IRS sent me a check saying, I should have gotten it. Even the year that I screwed up massively by not realizing I needed to pay the AMT, they just sen me a bill. The experiences left me thinking that the people that constantly fear monger about the IRS are just out and out committing massive tax fraud. Probably not a coincidence that these are the same people complain the loudest about tax enforcement.
- logicalmonster 4y ago
  What happens in the other 20% of cases? It feels like you're just handwaving away a large part of the story and how people react to dealing with the IRS. And again, if the government already knows your income to this level, why don't they send you a tax bill and completely eliminate the time, energy, and stress that average people face preparing taxes.
  - bombcar 4y ago
    The other 20% are where they might actually suspect you of something, but even those are much easier to deal with than people expect. The only one I know of personally was a friend misfiled his taxes and didn't allocate cost basis for day trading so the IRS had each sale marked as a cost basis of zero, and they sent a letter saying "you owe $800k in taxes based on this" but all he had to do was dig out the cost basis and refile. And yes, for the vast majority of people who do NOT own a business, they could just send you the 1040 already filled out (there's actually a way to get them to do that IIRC, something like you file for an extension and then request "what tax info do you have on me and the result is basically a filled out 1040).
eximius 4y ago
It's somewhere in between. I know of second hand stories where folks were unintentionally strung along by the IRS. They'd get a notice that they underpaid by $X and it had been Y days with Z% interest being applied. So they send in a check. They get back another notice that their payment was received but the amount due had increased due to interest in the interim so a small balance still remained. Back and forth a few times until finally the person overpays significantly just to end the whole drama until the IRS finally sends a refund. Is this the end of the world? No. It is stupid, stressful, and potentially ruinous given the economic reality that huge swaths of people can't sustain a surprise bill (outdated and likely worse by now: https://www.cnbc.com/2019/07/20/heres-why-so-many-americans-cant-handle-a-400-unexpected-expense.html https://www.cnbc.com/2019/07/20/heres-why-so-many-americans-...). Now, the cohorts who can't absorb a surprise tax bill likely fall into two camps: unlikely to be hit with a surprise tax bill - their taxes just aren't complicated enough, they don't earn much, etc. But at the same time, surprise 'income' like debt forgiveness can still hurt people.

bombcar 4y ago

In 80% of the cases where you mess up AND they notice they just send you a form saying “here’s our numbers” and you can say ok or complain. They’ve even done that to me when I made a mistake that resulted in a smaller refund; they sent the “you fucked up” letter along with a check.

jonathankoren 4y ago
Same. Every time I got the EIC, I never understood why, but the IRS sent me a check saying, I should have gotten it. Even the year that I screwed up massively by not realizing I needed to pay the AMT, they just sen me a bill. The experiences left me thinking that the people that constantly fear monger about the IRS are just out and out committing massive tax fraud. Probably not a coincidence that these are the same people complain the loudest about tax enforcement.
logicalmonster 4y ago
What happens in the other 20% of cases? It feels like you're just handwaving away a large part of the story and how people react to dealing with the IRS. And again, if the government already knows your income to this level, why don't they send you a tax bill and completely eliminate the time, energy, and stress that average people face preparing taxes.
- bombcar 4y ago
  The other 20% are where they might actually suspect you of something, but even those are much easier to deal with than people expect. The only one I know of personally was a friend misfiled his taxes and didn't allocate cost basis for day trading so the IRS had each sale marked as a cost basis of zero, and they sent a letter saying "you owe $800k in taxes based on this" but all he had to do was dig out the cost basis and refile. And yes, for the vast majority of people who do NOT own a business, they could just send you the 1040 already filled out (there's actually a way to get them to do that IIRC, something like you file for an extension and then request "what tax info do you have on me and the result is basically a filled out 1040).

eximius 4y ago

It's somewhere in between. I know of second hand stories where folks were unintentionally strung along by the IRS. They'd get a notice that they underpaid by $X and it had been Y days with Z% interest being applied. So they send in a check. They get back another notice that their payment was received but the amount due had increased due to interest in the interim so a small balance still remained. Back and forth a few times until finally the person overpays significantly just to end the whole drama until the IRS finally sends a refund. Is this the end of the world? No. It is stupid, stressful, and potentially ruinous given the economic reality that huge swaths of people can't sustain a surprise bill (outdated and likely worse by now: https://www.cnbc.com/2019/07/20/heres-why-so-many-americans-cant-handle-a-400-unexpected-expense.html https://www.cnbc.com/2019/07/20/heres-why-so-many-americans-...). Now, the cohorts who can't absorb a surprise tax bill likely fall into two camps: unlikely to be hit with a surprise tax bill - their taxes just aren't complicated enough, they don't earn much, etc. But at the same time, surprise 'income' like debt forgiveness can still hurt people.