6 ms·

> Yeah the American system absurd. “We have all the data but you still need to figure it out yourself and if you get it wrong you’ll get in trouble”. IRS knows

by lr1970 3y ago

> Yeah the American system absurd. “We have all the data but you still need to figure it out yourself and if you get it wrong you’ll get in trouble”. IRS knows all the income data only in simple cases like salaried employees with W-2 forms. If you are business owner or contractor the things can be more complicated and what IRS really knows is a guessing game. IRS is posturing and bluffing that they know everything and put pressure on a tax-payer to voluntary disclose as much as possible about their income out of fear of criminal persecution. Also they will rarely tell you that you "overpaid" your taxes unless it is a simple math mistake.

rapht 3y ago
> IRS knows all the income data only in simple cases like salaried employees with W-2 forms. If you are business owner or contractor the things can be more complicated If you already can avoid the trouble for 50% (?) of the people who are in the standard case, it's already a massive win.
- jghn 3y ago
  Exactly. Doing custom taxes could be opt-in. "Here's what we're going to charge you. If you think you owe less due to details we don't have, feel free to file the old way"
  - PopAlongKid 3y ago
    Correction: "If you think you owe less or more due to details we don't have, feel free to file the old way"
    - sgerenser 3y ago
      I’d be happy with a system like this, as long as they made it very clear WHEN you should do it the old way. For example: “Our estimate of your income may be too high in certain situations, for example if you are a business owner, independent contractor, or receive income from RSU or ESPP sales where the tax basis reported to the IRS is missing or inaccurate. In those cases, you are encouraged to fill out your tax return using the tool of your choice” (Hopefully with links to some options). Otherwise, there’s going to be a lot of tech workers who don’t understand RSU taxation paying thousands/10s of thousands of dollars extra in taxes for no reason. (And yes, I realize some may think this is a feature, not a bug.)
      - jjnoakes 3y ago
        I don't understand why the RSU basis adjustment isn't reported automatically. All of the information is available without my involvement...
      - patrick451 3y ago
        I worry about be one of those. what is it about RSU compensation that is commonly misunderstood?
        firstlink 3y ago
        The IRS requires your broker to report a different cost basis to you than you are entitled to use. It is government-mandated disinformation, not a misunderstanding.
        sgerenser 3y ago
        It’s often the case that you sell a block of RSU stock, and the broker reports the entire sale as a capital gain (e.g. if you sell $50K, then it shows up as a $50K capital gain on your broker’s 1099). But in reality, the gain should only be the difference between the price it was when it showed up in your account and when you sold it (which can actually be a loss), because the basis is already included in your W-2 as earned income.
        unmole 3y ago
        E-Trade and Fidelity report gains correctly. Which broker doesn't?
        sgerenser 3y ago
        My recollection is they report it on a “supplemental information” form, not directly on the 1099. If you just do a naive import in TurboTax or similar, you’ll overpay your taxes by thousands.
      - flagrant_taco 3y ago
        Simplifying the tax code would go a long way. We don't need to go all the way towards some flat consumption tax, simply eliminating tax deductions, credits, and write-offs would make calculating a person's tax burden much easier.
    - ac29 3y ago
      And that's probably the main reason it isnt done. The IRS assumes nearly no one would report extra taxable income if they came out and said all of the things they already knew (and by implication, dont know).
      - DSMan195276 3y ago
        Well I think that depends on what is being provided, most suggestions I've seen only talk about cover the simple case of some W-2s and other income sources already reported to the government and taking the standard deduction. If that's the case then the government doesn't _have_ to provide everything it knows, it would be on you to know if you have income that wasn't already reported to the government and file yourself, and it would be the same as now in that you don't know if they'll find out about your other income. But also, there's still the risk of getting audited either way. Just because they apparently don't know about some income _now_ doesn't mean they'll never figure it out later.
      - jghn 3y ago
        Right. I was assuming most people would choose the lower of whatever the IRS said or their calculations showed. And that's fine, presumably that would be taken into account on the government side in order to get enough money.
      - KyeRussell 3y ago
        Here we go. American exceptionalism again. No surprise here. It isn’t done because your government is stupid and corrupt. Look at the myriad other examples of this happening in other countries.
        throwway120385 3y ago
        Thanks. Glad to have this pat and reductive answer to all of our problems.
        dopidopHN 3y ago
        Right? Now that you know the answer, apply it to every problem where « but for us It’s different » Gun control, ISP prices & availability, public transportation and in particular long range trains are the top of the list of those subjects. At first it’s fun, then it’s anoying, then it’s sad. Thougt & prayers ! It will get better, or at least you will know intrinsically that you exhausted all of the 1 solutions.
  - tcmart14 3y ago
    Isn't this what some of the nordic countries do? They send you have receipt/bill and you have a window to correct it.
    - kimixa 3y ago
      It's what the UK does too - I never had to file anything for taxes if I only had reported salaried income. Even stuff like interest or investments is mostly automatically handled, you often need to be doing something a little unusual in that area to require anything. And even if you did have some side income to report, the HMRC website had most things in a pretty easy wizard-like form, similar to turbotax or the like, with the things they already knew about pre-filled.
  - deleted 3y ago
    [deleted]
- rodgerd 3y ago
  This is how it works in New Zealand; you get a tax statement. You can file if you think that IRD got it wrong, and you have to file if you have income from (for example) dividends, overseas incomes, or similar sources. But for the great majority of people whose income comes from working for a living, you don't need to do anything to be 100% legally compliant.
- nico 3y ago
  This is how it works in Chile It’s been like this for more than 10 years In the last 5 the government made everything electronic Every invoice or receipt any business or individual issues, is digitally signed by the government If you are a single wage earner, you don’t even need to file your return, your prepaid taxes exactly match your overall tax burden You can always choose to file if you want to or need to in case your situation is more nuanced But most people don’t really need to do anything
- jwestbury 3y ago
  I moved to the UK last year from the US. Over here, you only file your own taxes if your income is over 100k GBP -- which is probably a reasonably simple proxy for "your tax situation might be more complicated." No doubt it has edge cases, but it's a nice sorting mechanism for the majority of cases.
deleted 3y ago
[deleted]
kelnos 3y ago
> IRS knows all the income data only in simple cases like salaried employees with W-2 forms. These "simple" cases still cover the vast majority of American taxpayers.
chrismcb 3y ago
IRS knows about my taxes because my employer informed them. If you are a business owner, well talk to your boss about getting the taxes done. Self employed, business owners, and petite with some investments will still need to do some work.

by lr1970 3y ago

rapht 3y ago

> IRS knows all the income data only in simple cases like salaried employees with W-2 forms. If you are business owner or contractor the things can be more complicated If you already can avoid the trouble for 50% (?) of the people who are in the standard case, it's already a massive win.

jghn 3y ago
Exactly. Doing custom taxes could be opt-in. "Here's what we're going to charge you. If you think you owe less due to details we don't have, feel free to file the old way"
- PopAlongKid 3y ago
  Correction: "If you think you owe less or more due to details we don't have, feel free to file the old way"
  - sgerenser 3y ago
    I’d be happy with a system like this, as long as they made it very clear WHEN you should do it the old way. For example: “Our estimate of your income may be too high in certain situations, for example if you are a business owner, independent contractor, or receive income from RSU or ESPP sales where the tax basis reported to the IRS is missing or inaccurate. In those cases, you are encouraged to fill out your tax return using the tool of your choice” (Hopefully with links to some options). Otherwise, there’s going to be a lot of tech workers who don’t understand RSU taxation paying thousands/10s of thousands of dollars extra in taxes for no reason. (And yes, I realize some may think this is a feature, not a bug.)
    - jjnoakes 3y ago
      I don't understand why the RSU basis adjustment isn't reported automatically. All of the information is available without my involvement...
    - patrick451 3y ago
      I worry about be one of those. what is it about RSU compensation that is commonly misunderstood?
      - firstlink 3y ago
        The IRS requires your broker to report a different cost basis to you than you are entitled to use. It is government-mandated disinformation, not a misunderstanding.
      - sgerenser 3y ago
        It’s often the case that you sell a block of RSU stock, and the broker reports the entire sale as a capital gain (e.g. if you sell $50K, then it shows up as a $50K capital gain on your broker’s 1099). But in reality, the gain should only be the difference between the price it was when it showed up in your account and when you sold it (which can actually be a loss), because the basis is already included in your W-2 as earned income.
        unmole 3y ago
        E-Trade and Fidelity report gains correctly. Which broker doesn't?
        sgerenser 3y ago
        My recollection is they report it on a “supplemental information” form, not directly on the 1099. If you just do a naive import in TurboTax or similar, you’ll overpay your taxes by thousands.
    - flagrant_taco 3y ago
      Simplifying the tax code would go a long way. We don't need to go all the way towards some flat consumption tax, simply eliminating tax deductions, credits, and write-offs would make calculating a person's tax burden much easier.
  - ac29 3y ago
    And that's probably the main reason it isnt done. The IRS assumes nearly no one would report extra taxable income if they came out and said all of the things they already knew (and by implication, dont know).
    - DSMan195276 3y ago
      Well I think that depends on what is being provided, most suggestions I've seen only talk about cover the simple case of some W-2s and other income sources already reported to the government and taking the standard deduction. If that's the case then the government doesn't _have_ to provide everything it knows, it would be on you to know if you have income that wasn't already reported to the government and file yourself, and it would be the same as now in that you don't know if they'll find out about your other income. But also, there's still the risk of getting audited either way. Just because they apparently don't know about some income _now_ doesn't mean they'll never figure it out later.
    - jghn 3y ago
      Right. I was assuming most people would choose the lower of whatever the IRS said or their calculations showed. And that's fine, presumably that would be taken into account on the government side in order to get enough money.
    - KyeRussell 3y ago
      Here we go. American exceptionalism again. No surprise here. It isn’t done because your government is stupid and corrupt. Look at the myriad other examples of this happening in other countries.
      - throwway120385 3y ago
        Thanks. Glad to have this pat and reductive answer to all of our problems.
        dopidopHN 3y ago
        Right? Now that you know the answer, apply it to every problem where « but for us It’s different » Gun control, ISP prices & availability, public transportation and in particular long range trains are the top of the list of those subjects. At first it’s fun, then it’s anoying, then it’s sad. Thougt & prayers ! It will get better, or at least you will know intrinsically that you exhausted all of the 1 solutions.
- tcmart14 3y ago
  Isn't this what some of the nordic countries do? They send you have receipt/bill and you have a window to correct it.
  - kimixa 3y ago
    It's what the UK does too - I never had to file anything for taxes if I only had reported salaried income. Even stuff like interest or investments is mostly automatically handled, you often need to be doing something a little unusual in that area to require anything. And even if you did have some side income to report, the HMRC website had most things in a pretty easy wizard-like form, similar to turbotax or the like, with the things they already knew about pre-filled.
- deleted 3y ago
  [deleted]
rodgerd 3y ago
This is how it works in New Zealand; you get a tax statement. You can file if you think that IRD got it wrong, and you have to file if you have income from (for example) dividends, overseas incomes, or similar sources. But for the great majority of people whose income comes from working for a living, you don't need to do anything to be 100% legally compliant.
nico 3y ago
This is how it works in Chile It’s been like this for more than 10 years In the last 5 the government made everything electronic Every invoice or receipt any business or individual issues, is digitally signed by the government If you are a single wage earner, you don’t even need to file your return, your prepaid taxes exactly match your overall tax burden You can always choose to file if you want to or need to in case your situation is more nuanced But most people don’t really need to do anything
jwestbury 3y ago
I moved to the UK last year from the US. Over here, you only file your own taxes if your income is over 100k GBP -- which is probably a reasonably simple proxy for "your tax situation might be more complicated." No doubt it has edge cases, but it's a nice sorting mechanism for the majority of cases.

deleted 3y ago

[deleted]

kelnos 3y ago

> IRS knows all the income data only in simple cases like salaried employees with W-2 forms. These "simple" cases still cover the vast majority of American taxpayers.

chrismcb 3y ago

IRS knows about my taxes because my employer informed them. If you are a business owner, well talk to your boss about getting the taxes done. Self employed, business owners, and petite with some investments will still need to do some work.