3 ms·

I'm not saying it's a GOOD reason, but the main reason the government doesn't just send you a tax bill and say, "here, now pay up" is because there are lots of

I'm not saying it's a GOOD reason, but the main reason the government doesn't just send you a tax bill and say, "here, now pay up" is because there are lots of things which are taxed but the government doesn't "see" because they are not (or cannot reliably be) reported. This goes for certain credits and deductions as well. So the only real leverage they have is to tell everyone to get it right or face the possibility of an audit.

alistairSH 3y ago
Those deductions and credits (mostly) apply to people itemizing their deductions. About 30% of households itemize - the remaining 70% take the standard deduction. [EDIT - since the tax changes in 2018, the numbers are closer to 10% itemize/90% standard deduction] And most of the common items are known to the IRS... mortgage and mortgage interest, property taxes, state taxes, education credits, retirement savings. Common items that could be known to the IRS (but aren't necessarily today)... charitable giving, medical expenses, self-employed healthcare premiums. The IRS could, relatively easily, email/SMS/snail-mail you a pre-filled tax return with the info they do have. If nothing needs updated, you just (e-)sign and provide payment info.
- lazide 3y ago
  Most of the economy (as in cash flow) is through businesses, and what you’re saying doesn’t apply to them.
  - alistairSH 3y ago
    So...? There are 131,000,000 households in the US. Something like 40% of people surveyed use tax prep software (at $50+/year). That's a massive waste of money that society could use on something useful.
    - lazide 3y ago
      Someone asked why it was happening in the US. I pointed out why. That not everyone agrees that it is a waste, or that society would find a better use for it is of course going to be a matter of opinion. Which some folks are heavily incentivized to weigh in on (to the point it may be a large percentage or all of their net worth), and to others it’s $50/yr.
- pclmulqdq 3y ago
  That's not really true. Itemized deductions are a small part of this, and so are the individual tax credits. Business accounting and post-tax investment are actually the big items here, and are impossible for the IRS to do for you. I'm afraid that if you get a stock grant from your employer, that puts you beyond where the IRS can send you a pre-filled form that is correct.
  - alistairSH 3y ago
    I'm afraid that if you get a stock grant from your employer, that puts you beyond where the IRS can send you a pre-filled form that is correct. Sure, but that's a tiny fraction of the population. Nobody is saying the IRS should send you a fixed return. Only that they should send what they have, and if nothing needs changed, great, society is better off.
    - frumper 3y ago
      Lots of deductions and credits are on top of the standard deduction. School expenses, child credits, child care expenses, retirement savings, EIC credits and student loan interest are some very common things.
      - semi 3y ago
        Imagine if all you had to do at tax time was enumerate those deductions, instead of that and the rest of doing your taxes
  - kelnos 3y ago
    There's no reason why this has to be the case, though. Brokerages are already required to report lots of things about their clients to the IRS. No reason why "stock grant from employer" couldn't be one of them. (Regardless, these stock grants usually end up as W-2 income, so I'm not sure why you think this isn't covered already. Stock option grants often need some special handling, though.) In any case, most Americans do not care about this. I'm getting tired of the "10% of taxpayers couldn't fully use this system, so let's not bother" type arguments.
shadowgovt 3y ago
Other countries just calculate up an estimated bill and it seems to work for them. Is there something about US taxes that makes that solution intractable?
- lazide 3y ago
  There is a large percentage of the US economy is dependent on them being inscrutable for various reasons.
- lozenge 3y ago
  They weren't designed for it. I'm in the UK and there's reporting systems for- employers, pension schemes, savings accounts, charities and student loans- all to avoid most people having to fill in a tax return. Something like deducting sales tax would never be passed as a law because it wouldn't be accessible to most people. As an analogy, we can say that laundry will never be automated because the washing machine can't separate whites from colours, doesn't apply stain remover, doesn't remove the delicates when it transfers to the dryer, etc. All technically correct, but people stopped caring. People have a financial and emotional attachment to their tax loopholes though.

alistairSH 3y ago

Those deductions and credits (mostly) apply to people itemizing their deductions. About 30% of households itemize - the remaining 70% take the standard deduction. [EDIT - since the tax changes in 2018, the numbers are closer to 10% itemize/90% standard deduction] And most of the common items are known to the IRS... mortgage and mortgage interest, property taxes, state taxes, education credits, retirement savings. Common items that could be known to the IRS (but aren't necessarily today)... charitable giving, medical expenses, self-employed healthcare premiums. The IRS could, relatively easily, email/SMS/snail-mail you a pre-filled tax return with the info they do have. If nothing needs updated, you just (e-)sign and provide payment info.

lazide 3y ago
Most of the economy (as in cash flow) is through businesses, and what you’re saying doesn’t apply to them.
- alistairSH 3y ago
  So...? There are 131,000,000 households in the US. Something like 40% of people surveyed use tax prep software (at $50+/year). That's a massive waste of money that society could use on something useful.
  - lazide 3y ago
    Someone asked why it was happening in the US. I pointed out why. That not everyone agrees that it is a waste, or that society would find a better use for it is of course going to be a matter of opinion. Which some folks are heavily incentivized to weigh in on (to the point it may be a large percentage or all of their net worth), and to others it’s $50/yr.
pclmulqdq 3y ago
That's not really true. Itemized deductions are a small part of this, and so are the individual tax credits. Business accounting and post-tax investment are actually the big items here, and are impossible for the IRS to do for you. I'm afraid that if you get a stock grant from your employer, that puts you beyond where the IRS can send you a pre-filled form that is correct.
- alistairSH 3y ago
  I'm afraid that if you get a stock grant from your employer, that puts you beyond where the IRS can send you a pre-filled form that is correct. Sure, but that's a tiny fraction of the population. Nobody is saying the IRS should send you a fixed return. Only that they should send what they have, and if nothing needs changed, great, society is better off.
  - frumper 3y ago
    Lots of deductions and credits are on top of the standard deduction. School expenses, child credits, child care expenses, retirement savings, EIC credits and student loan interest are some very common things.
    - semi 3y ago
      Imagine if all you had to do at tax time was enumerate those deductions, instead of that and the rest of doing your taxes
- kelnos 3y ago
  There's no reason why this has to be the case, though. Brokerages are already required to report lots of things about their clients to the IRS. No reason why "stock grant from employer" couldn't be one of them. (Regardless, these stock grants usually end up as W-2 income, so I'm not sure why you think this isn't covered already. Stock option grants often need some special handling, though.) In any case, most Americans do not care about this. I'm getting tired of the "10% of taxpayers couldn't fully use this system, so let's not bother" type arguments.

shadowgovt 3y ago

Other countries just calculate up an estimated bill and it seems to work for them. Is there something about US taxes that makes that solution intractable?

lazide 3y ago
There is a large percentage of the US economy is dependent on them being inscrutable for various reasons.
lozenge 3y ago
They weren't designed for it. I'm in the UK and there's reporting systems for- employers, pension schemes, savings accounts, charities and student loans- all to avoid most people having to fill in a tax return. Something like deducting sales tax would never be passed as a law because it wouldn't be accessible to most people. As an analogy, we can say that laundry will never be automated because the washing machine can't separate whites from colours, doesn't apply stain remover, doesn't remove the delicates when it transfers to the dryer, etc. All technically correct, but people stopped caring. People have a financial and emotional attachment to their tax loopholes though.