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IRS moves forward with a new free-file tax return system

462 points by DocFeind 3y ago

sys_64738 3y ago
I'd also like to add that I hope all tax prep companies crash and burn and everybody loses their jobs. They are parasites.
mydriasis 3y ago
> Intuit spent at least $25.6 million since 2006 on lobbying, H&R Block about $9.6 million and the conservative Americans for Tax Reform roughly $3 million. > In contrast, the NAACP has spent $140,000 lobbying on “free-file” since 2006 and Public Citizen has spent $110,000 in the same time frame. With two orders of magnitude of lobbying dollars difference on either side, I'm surprised this is going anywhere. > “An IRS direct-to-e-file system is redundant and will not be free – not free to build, not free to operate, and not free for taxpayers,” Plummer (a spokesman for Intuit) said, adding that it “will unnecessarily cost taxpayers billions of dollars.” Oh, like the system your company built and lobbies for? How do you say stuff like this out loud without your pants bursting into flames on the spot?
- andybak 3y ago
  Imagine if they spent that money on, you know, making a better product.
  - snarf21 3y ago
    But lobbying has such better ROI!! .. We also need lawys from the federal level that all these "known" things must be pushed to the IRS and the state and local use that as their source of information .. Then this software just needs to deal with federal deductions that aren't digital or optional like charity .. We have such a dumb system
  - asah 3y ago
    Alas, free would still win enough marketshare for it to make sense to spend on lobbyists to delay this. :-(
  - stetrain 3y ago
    They seem to spend all of their money adding fake slow progress bars that advertise their premium version to you.
  - lIl-IIIl 3y ago
    They would have a better product, but they'd be out of business since without lobbying against it, the government product would actually be built.
  - jfengel 3y ago
    The product is fine. It doesn't really need radical improvements. That money should have been returned to shareholders. What it needs is to not exist. The product does a fine job of doing an unnecessary thing. For the vast majority of users it should be a tax bill or refund check that arrives with no user intervention at all. The remaining use cases should be handled differently -- perhaps by a professional. That professional may themselves want such software, but it's likely a different interaction than software also aimed at users with much simpler use cases.
- denimnerd42 3y ago
  I'm not arguing one way or another but one point the tax software companies do have is who pays the cost. In the commercial product arena, the products are bought by people who make over median wage. The lower income folks have simpler taxes usually. The free products cover them generally. I may be wrong but that's how I see it. I didn't feel the need to pay for any software until I was making a lot of money (relative to median) and managing a lot of assets.
  - rhaway84773 3y ago
    And you pointed out exactly what the problem with the current system is. The rich can pay someone to do the work for them. This saves them time, stress, energy, etc. The poor cannot. They have to do all this themselves and then they’re open to the risk of actually getting something wrong. And the impact of getting something wrong is highly imbalanced. If they get something wrong and end up paying more tax than they need to there will never be a second thought given to it. But if they mess up and pay less taxes than they should they will be hit with a penalty, interest, and even maybe an audit. And the idea that everyone should be reasonably competent in taxes seems a little ridiculous to be honest especially when no one is taught how to do taxes in any point in their lives. An alternative might be to teach how to do taxes in school, but at that point the cost of teaching taxation would far exceed the cost of developing this software, never mind the human hours that are wasted.
    - ndriscoll 3y ago
      > If they get something wrong and end up paying more tax than they need to there will never be a second thought given to it. Anecdotally, I messed up copying tax owed from the table a couple years back, and the IRS sent me a letter telling me I made a mistake and overpaid, along with a check for the difference. In any case, a lot of the complication in the tax code comes down to the government incentivizing certain behaviors, so it makes sense that we should put more focus on teaching people to read the rules and find out what those incentives are. Of course a free calculation tool to run simulations could help people to understand those rules, and we ought to make the actual filing more convenient for everyone.
- NikolaNovak 3y ago
  It's tricky. I can definitely foresee a future, based on governmental record in publicly-facing IT systems, where every single word of that statement is technically 100% true. First part is all but tautological - Of course it won't s not free to build or operate; and thus it wouldn't be "free for taxpayers" in the most technical sense (this doesn't mean it wouldn't be excellent value or save money overall or even cost more money but save it where it counts). It's the last sentence (unnecessarily cost taxpayers billions) that could go either way. This could in principle end up an efficient and effective, easy to use and helpful well performing system that's a brilliant investment of public money. I hate to say it though, but it's also extremely possible it would cost a lot of money with nobody using it because it sucks. Besides, it feels like in the USA, IT systems are only a part of issue with tax system. Actual tax code and submission options are the bigger part.
  - lowercased 3y ago
    We've had the last few years of one party demonizing the IRS, insisting they're "coming after" the little guy. I suspect trust in something like this is already starting on shaky ground before it's even rolled out, which may contribute to "it's such a waste - no one uses it!". Even if a substantial of people that need this the most (people least able to afford any filing fees), this will continue to be fought. :/
  - willis936 3y ago
    Just because it's true doesn't fireproof their pants. They already operate a service that is not free to build operate, and we know beyond a shadow of a doubt costs taxpayers needless additional billions of dollars. So then why would the taxpayers not want to invest an alternative that could spend "needless billions" to save additional needless billions?
  - theptip 3y ago
    Classic political rhetoric. Who cares about “free”? I’m already paying for TurboTax. This only needs to be cheaper.
    - deleted 3y ago
- sitzkrieg 3y ago
  im glad these shoe-in clowns are finally having to hopefully complete w fed direct free efiling
- clucas 3y ago
  >With two orders of magnitude of lobbying dollars difference on either side, I'm surprised this is going anywhere. I think everyone should use this to update their priors on the impact of lobbying. Government action is not contingent on a dollar vs dollar comparison. Citizens United did not result in a raft of unpopular legislation being passed. (Not saying it was the right decision, just that its impact was overstated.) We should all feel heartened that our government is responding to good arguments over lobbying dollars. Another one we should keep fighting on is Right to Repair. John Deere and the like can put as much money into the fight as they want - as long as we have people like Rossman being gadflies, sanity will win. Eventually.
  - OkayPhysicist 3y ago
    Frankly, by far the biggest impact of lobbying happens when one side has anything at all, and the other side doesn't. Most lobbying isn't bribery, as much as it is spending money to get create a situation where the politician will listen to you explain your case. When the politician has heard both sides in such a manner, they'll basically vote with their conscience. When only one side has explained their argument, it's a lot easier for the politician to vote with that one.
    - nielsbot 3y ago
      We'd be happy to put lots of money into your reelection campaign if you'll hear us out. e.g. Bribery.
- stonemetal12 3y ago
  If I were Intuit, I would be spending that on making sure the IRS selected us as the sole provider of their free tax software. Then make sure it's slightly more annoying than using TurboTax so I could get paid twice for the same job.
  - LapsangGuzzler 3y ago
    It would be an epic failure if the government issued a tax collection software contract out and didn’t put in some sort of clause preventing intuit from providing a competing service. I have a hard time seeing them do something like that.
- daniel-cussen 3y ago
  > “will unnecessarily cost taxpayers billions of dollars.” This is undisputably true. H&R Block n Intuit are taxpayers, n free-file will cost them billions of dollars. Being real, online taxes through the SII work great in Chile.
- hot_gril 3y ago
  It's not a crazy statement. I expect the IRS's system to be worse and more costly than TurboTax on the technical side, at least initially. But it's a step in the eventual right direction; I shouldn't need a third party to pay taxes.
- throwawaymobule 3y ago
  Are the NAACP/public citizen the highest value lobbyists for this? I would not have guessed, but makes sense reading it.
jmclnx 3y ago
Lets see, the US has a big election next year, early fund raising ? Since the Citizens United Ruling, political bribes are now legal in the US. I believe this system will only support the easiest of tax forms, the type any idiot can fill out. Have one of these: 401k, pretax medical/college accounts, stock dividends, non-US interest, income other then wages from commercial for-profit companies, you will be SOL. And I am sure many people can add to the list of these items. These are the items that make Tax Accountants the real money.
- Spoom 3y ago
  Nearly everything you mentioned automatically files paperwork with the IRS anyway. I'm not sure why you think that they could not be part of a pre-filled return.
  - Volundr 3y ago
    I feel like this is a point that gets overlooked in the discussion. The IRS ALREADY has software that does your taxes. It's just that currently it's used to validate you did it correctly and they aren't going to tell you the results unless you did it wrong. Sure building this system isn't going to be as easy as "give our existing software a public URL", but there should be a lot of code reuse happening.
  - e40 3y ago
    It's pretty clear why they think this, due to lobbying. I think everyone agrees none of those items should be grounds for not using this theoretical system.
- lowercased 3y ago
  I share some skepticism, but I suspect some basic stuff may be supported (out of the gate or soon) - IRA/401k info may not be too difficult, at least with data from major players (vanguard/fidelity/etc). I bought and sold two houses, moved between states, and our family had two businesses as well as W2 income - all this over an 18 month period. I went to an HR Block ('big name, offices in multiple states, etc') and they made a lot of mistakes, took about 2 years to unwind the mess.
bozhark 3y ago
> Republicans on the House Appropriations Committee in June proposed a budget rider that would prohibit funds to be used for the IRS to create a government-run tax preparation software, unless approved by a group of House and Senate committees. The move “safeguards the IRS from an obvious conflict of interest where the tax collector becomes the tax preparer,” the bill’s summary states. That’s a hard R in Republican
- ellisv 3y ago
  What a ridiculous take. Use of the software wouldn't be compulsory. The IRS already (mostly) knows what the payer owes.
  - sokoloff 3y ago
    There are two problems with that: The one that affects most people is that the IRS system is "eventually consistent", but they do not currently have the information needed to file your return on the date your return is due. If you don't believe me, request your transcript-of-records* on your account filing date. Then request it again in early fall. The latter will, IME, be complete while the former will not. * - https://www.irs.gov/individuals/get-transcript https://www.irs.gov/individuals/get-transcript The one that affects only a subset of people is that many deductible items that go into tax returns are never shared with the IRS at all and only the taxpayer knows about them (today).
    - jedberg 3y ago
      You're technically correct, but in most cases the date the original form was filed with the IRS was around the deadline. It just takes them a while to upload them all. But we could also just make the filing deadline October for individuals. Most of those late arriving forms are K1s for partnerships that only file in April.
  - JohnFen 3y ago
    Technically, the use of the software isn't compulsory. You can still fill out the physical tax forms and mail them in. That said, I am solidly on board with the IRS just computing the taxes for taxpayers and sending them a bill. Taxpayers who dispute the bill can then just file their own taxes as normal.
bigbillheck 3y ago
I've been using Free File Fillable Forms (https://www.freefilefillableforms.com https://www.freefilefillableforms.com) for several years now and look forward to whatever the IRS comes up with.
- owenmarshall 3y ago
  Same here – if you like doing your taxes on paper, AND you post on this site, you'll love it & it'll save you some cash over Turbotax/friends. I will say it isn't the most user friendly application, as evidenced by the error I received this year by email: Issue : Business Rule X0000-005 - The XML data has failed schema validation. cvc-complex-type.2.4.a. Invalid content was found starting with element `QualifiedCareExpensesPaidAmt`. One of `{"http://www.irs.gov/efile":IdentityProtectionPIN, "http://www.irs.gov/efile":QualifyingPersonSSN, "http://www.irs.gov/efile":DiedLiteralCd}` is expected. The following information may help you determine the form at issue: Field/Xpath: /efile:Return[1]/efile:ReturnData[1]/efile:IRS2441[1]/efile:QualifyingPersonGrp[2]/efile:QualifiedCareExpensesPaidAmt[1] It did help me find the form & line at issue instantly, but I'm not sure a non-programmer would have as much luck.
seventytwo 3y ago
Good.
enterthematrix 3y ago
Intuit is a bunch of vampires stealing money from Americans. Every developed country in the world has a relatively easy tax system for citizens, but only the US operates in this insane way where they willingly tax citizens by not providing them with an easy way to do taxes, and instead sends them to the wolves of Intuit and others.
- Nifty3929 3y ago
  Why blame intuit for our crappy tax policy? Sure, they might lobby for more complexity, but the legislators that we elected pass the laws.
  - Kalium 3y ago
    Intuit is directly responsible for a long and aggressive lobbying effort to keep tax filing expensive and privately run.
    - hellojesus 3y ago
      Yes, but any public representative should easily see past that nonsense. It's their entire job.
    - sokoloff 3y ago
      My kids are directly responsible for a long and aggressive lobbying effort to eat ice cream every night. Because we are effective parents and do our job, they don't get their way. I can't see why our elected representatives can't manage to act with the same level of responsibility.
      - landemva 3y ago
        Those voting won't recall the politicians because the people are distracted by the latest divisive outrage.
      - cmdli 3y ago
        Do you expect voters to switch sides of the aisle over this issue? If not, then politicians have no reason not to take industry money. After all, if you have access to all the campaign and other funds without losing voters, then it would be idiotic not to follow the money.
BurningFrog 3y ago
I don't want a free tax filing system. I want the IRS to give me form - paper or digital - with the data they already know from my employer, bank, etc already in. I'd be happy to enter the other things myself.
- ellisv 3y ago
  They will if you get it wrong enough.
  - atlasunshrugged 3y ago
    Having just received a letter in the mail saying I owe an extra ~$850 from 2020 I can confirm this is the case!
    - RetpolineDrama 3y ago
      Did they say what for?
      - atlasunshrugged 3y ago
        They probably did at an extremely high level, I already paid and threw it away (which was silly... don't do tax stuff when mentally exhausted) but it certainly had no specific details or context on how they arrived at that conclusion, what exactly was wrong, etc. It did have some very serious statements about failure to pay, increased penalties for late fees, etc. and having tried to call the IRS in the past, I know that it's worse than pulling teeth to get real answers so I decided this fight wasn't worth it. That said, I have also had them come back before with a mistake on their end and a check I wasn't expecting so my current mental model for the IRS is that they are honest brokers in general, just really really slow.
      - ellisv 3y ago
        They will say what for and give you the opportunity to dispute it. You can even call and talk with someone. They aren't faceless, heartless, or infallible. If it's their mistake, or an honest mistake on your part, they're pretty easy to work with.
toomuchtodo 3y ago
Between this and FedNow, US public goods are firing on all cylinders. You love to see it.
- polski-g 3y ago
  FedNow is still private sector, its ran by private banks. There is nowhere with a .gov domain you can go to, to send money to another US citizen.
  - toomuchtodo 3y ago
    Federal Reserve operates at the direction of Congress, who also directed them to build FedNow. FedNow is operated as a utility with a cost recovery (vs profit) model. Ergo, public good. https://www.federalreserve.gov/aboutthefed/fract.htm https://www.federalreserve.gov/aboutthefed/fract.htm https://www.pymnts.com/news/b2b-payments/2019/house-committee-fed-fednow-real-time-payments/ https://www.pymnts.com/news/b2b-payments/2019/house-committe...
lxe 3y ago
As much as I love not having to use paid filing software, I don't expect the federal government to create something that isn't incredibly frustrating to use that costs way too much to build
- ourmandave 3y ago
  I wonder if the help system for it will be AI based.
- robszumski 3y ago
  As a founder, some of the federal and state software for registering in various states, workers comp, etc and the estimated tax process as an individual is surprisingly decent. It's not great, but the state and federal level stuff is generally ok.
  - deleted 3y ago
    [deleted]
  - rufus_foreman 3y ago
    A couple years ago, the IRS didn't pay my income tax refund for six months, and during that time they couldn't tell me why they weren't paying, when or if they were going to pay it, what the status was, whether there was anything wrong, or when they would have any information on what the status was, and this was after waiting for many, many, many hours to get in contact with the person that wasn't going to tell me anything at all. And this is the IRS that wanted me to provide them with a selfie in order to make estimated income tax payments online. That is pretty far from OK. I will be paying for tax preparation software one way or the other, I would much rather pay the private sector so that I have a choice if I don't like a particular application.
- hedgehog 3y ago
  The financial sector is the clear winner in who makes worse user-facing software though. I've interacted with a whole variety of US government services from federal to city and they're on average better than the garbage I have to use for back end management related to bills and various investments. Consumer tax software is downright user-hostile.
ourmandave 3y ago
If you qualify, IRS will already figure your taxes for you. https://www.irs.gov/taxtopics/tc552 https://www.irs.gov/taxtopics/tc552 I wonder what happens if they make a mistake?
- junar 3y ago
  That's not the same thing. For the process referenced by your link, the taxpayer would still need to fill in most lines, only leaving a few calculation lines blank for the IRS to finish. > If you want the IRS to figure your tax. Read Form 1040 or 1040-SR, lines 1 through 15, and Schedule 1 (Form 1040), if applicable. Fill in the lines that apply to you and attach Schedule 1 (Form 1040), if applicable. Don’t complete Form 1040 or 1040-SR, line 16 or 17. > If you are filing a joint return, use the space on the dotted line next to the words “Adjusted Gross Income” on the first page of your return to separately show your taxable income and your spouse's taxable income. > Read Form 1040 or 1040-SR, lines 19 through 33, and Schedules 2 and 3 (Form 1040), if applicable. Fill in the lines that apply to you and attach Schedules 2 and 3 (Form 1040), if applicable. Don’t fill in Form 1040 or 1040-SR, lines 22, 24, 33, or 34 through 38. Don’t fill in Schedule 2 (Form 1040), line 1 or 3. Also, don’t complete Schedule 3 (Form 1040), line 6d, if you are completing Schedule R (Form 1040), or Form 1040 or 1040-SR, line 27, if you want the IRS to figure the credits shown on those lines. https://www.irs.gov/publications/p17#en_US_2022_publink1000174236 https://www.irs.gov/publications/p17#en_US_2022_publink10001... Also, it comes with several limitations. > When the IRS cannot figure your tax. The IRS can’t figure your tax for you if any of the following apply. > You want your refund directly deposited into your checking or savings account ... https://www.irs.gov/publications/p17#en_US_2022_publink1000174225 https://www.irs.gov/publications/p17#en_US_2022_publink10001...
WaitWaitWha 3y ago
I have a solution that both sides will hate. Reduce the complexity and size of the tax code to the point where an average taxpayer can complete it.
- mdaniel 3y ago
  I'll see your 'reduce complexity' and raise you "laws that compute things and have hyperlinks to other parts of the law should be written in a programming language" or even a con-lang designed for specificity. Hell, it's even called "the U.S. Code". I believe there's some precedent from the French but I believe it's a proof of concept: https://arxiv.org/pdf/2103.03198.pdf https://arxiv.org/pdf/2103.03198.pdf https://hn.algolia.com/?q=catala https://hn.algolia.com/?q=catala The asterisk to such a thing is that my understanding is that "ignorance of the law is no excuse" so changing from the official language of the country over to ... something else ... runs the risk of bringing back a "the clergy reads the laws and tells you what it says" style setup, but TBH even right now with the IRS tax code written in English I still cannot reasonably read it and conceptually author my own copy of Turbo Tax so I'll take my chances with the unintended consequences hazard
em3rgent0rdr 3y ago
"Free" should mean free of complexity. The big cost of doing taxes is not in submitting the taxes, but rather is the enormous byzantine complexity of calculating how much you owe.
kevinventullo 3y ago
Nowadays I outsource my tax prep to a professional, but I’d still be happy if this system can serve the folks with the easiest-to-file taxes. I don’t even care about the economic ROI, it just seems like a nice thing to have in a relatively wealthy country, like parks or libraries.
dang 3y ago
Related: IRS tests free e-filing system that could compete with tax prep giants - https://news.ycombinator.com/item?id=35950836 https://news.ycombinator.com/item?id=35950836 - May 2023 (567 comments) Call on the IRS to provide libre tax-filing software - https://news.ycombinator.com/item?id=35705469 https://news.ycombinator.com/item?id=35705469 - April 2023 (129 comments) 60M Americans have taxes so simple the IRS could do them automatically - https://news.ycombinator.com/item?id=35476709 https://news.ycombinator.com/item?id=35476709 - April 2023 (277 comments) Lobbyists begin chipping away at Biden’s $80B IRS overhaul - https://news.ycombinator.com/item?id=35381701 https://news.ycombinator.com/item?id=35381701 - March 2023 (214 comments) Intuit pouring money into lobbying amid push for free government-run tax filing - https://news.ycombinator.com/item?id=34840039 https://news.ycombinator.com/item?id=34840039 - Feb 2023 (178 comments) IRS builds task force to explore running its own free e-file system - https://news.ycombinator.com/item?id=34764952 https://news.ycombinator.com/item?id=34764952 - Feb 2023 (199 comments) IRS Free File: Do Your Taxes for Free - https://news.ycombinator.com/item?id=34462122 https://news.ycombinator.com/item?id=34462122 - Jan 2023 (247 comments) IRS will look into setting up a free e-filing system - https://news.ycombinator.com/item?id=32753099 https://news.ycombinator.com/item?id=32753099 - Sept 2022 (408 comments) The IRS could be on the verge of changing the way Americans file their taxes - https://news.ycombinator.com/item?id=32550841 https://news.ycombinator.com/item?id=32550841 - Aug 2022 (17 comments) IRS will study free tax filing options - https://news.ycombinator.com/item?id=32502321 https://news.ycombinator.com/item?id=32502321 - Aug 2022 (25 comments) TurboTax’s fight against free tax filing - https://news.ycombinator.com/item?id=31072202 https://news.ycombinator.com/item?id=31072202 - April 2022 (394 comments) Filing taxes could be free & simple. H&R Block & Intuit lobby against it (2017) - https://news.ycombinator.com/item?id=30856968 https://news.ycombinator.com/item?id=30856968 - March 2022 (114 comments) FTC sues Intuit for its deceptive TurboTax “free” filing campaign - https://news.ycombinator.com/item?id=30846071 https://news.ycombinator.com/item?id=30846071 - March 2022 (587 comments) Ask HN: How does TurboTax get away with dark patterns? - https://news.ycombinator.com/item?id=30409523 https://news.ycombinator.com/item?id=30409523 - Feb 2022 (122 comments) Why do Americans have to pay much to file their tax returns when the IRS knows? - https://news.ycombinator.com/item?id=30267361 https://news.ycombinator.com/item?id=30267361 - Feb 2022 (22 comments) Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Lobby Against It (2017) - https://news.ycombinator.com/item?id=30185484 https://news.ycombinator.com/item?id=30185484 - Feb 2022 (18 comments) California tried to save the nation from tax filing, then Intuit stepped in - https://news.ycombinator.com/item?id=28944200 https://news.ycombinator.com/item?id=28944200 - Oct 2021 (283 comments) The IRS has a big opportunity to fix the way Americans file taxes - https://news.ycombinator.com/item?id=28177289 https://news.ycombinator.com/item?id=28177289 - Aug 2021 (12 comments) ... plus dozens more: https://news.ycombinator.com/item?id=35970518 https://news.ycombinator.com/item?id=35970518
nonethewiser 3y ago
Controversial take for all of you: US taxes arent complicated because of tax software lobbiests. In fact they are already very simple if you actually value simplicity. But people dont - they value paying the least in taxes as possible (as they should). You can dumbly supply a small amount of information and be in complete compliance with the law. Virtually all complexity comes from proving ways in which you don't owe taxes and calculating how much. Thus, reducing complexity necessarily increases taxes for most cases. That means reducing complexity will always have lots of normal people rationally opposing it. Tax complexity reductions need to be accompanied by tax cuts across the board.
- tristor 3y ago
  Unfortunately your take is wrong, rather than controversial. I do my taxes every year, sometimes long-form, sometimes with software like TurboTax. The complexity of my taxes is entirely the fault of the way in which I am required to provide information to the IRS, most of which they already know, even though I take the standard deduction and don't do any "tricks". A simply example is if you have any sort of stocks/bonds or other tradeable asset holdings. Reporting this is a massive pain in the ass, because despite the fact that Schwab/Etrade/et-al already report this to the IRS, they make you list the cost basis, date of purchase, and sale price of every transaction that occurred within the tax year as part of calculating whether or not you're eligible for long-term capital gains or are taxed at your marginal income tax rate (short term capital gains). Very closely related is transactions dealing with RSUs, which every tech worker (most of HN) has to deal with. This is despite the fact I work a relatively normal white collar job on a W-2 and don't even file a base 1099 on a yearly basis. Taxes are complicated in the US because our tax code is bonkers and we're forced to precisely input a whole lot of spreadsheet bullshit that the IRS already knows so they can auto-check our work against their database rather than just telling me I owe them an extra $2k because despite having maximum withholding, the government wants to fuck me a little deeper in the ass. Exactly none of this is optional, I am /obligated/ to report all of this complexity, whether I paid enough or not, or I am legally penalized. Taxes /could/ be simple, but they are not, for anyone who makes more than about $60k/yr, which is nearly half the country. > You can dumbly supply a small amount of information and be in complete compliance with the law. This is not only factually untrue, anyone who follows this advice is putting themselves in significant legal jeopardy.
harshreality 3y ago
> “An IRS direct-to-e-file system is redundant and will not be free – not free to build, not free to operate, and not free for taxpayers,” Plummer said, adding that it “will unnecessarily cost taxpayers billions of dollars.” There's no reason why this has to be true. It might be true, but only due to inefficiencies. The IRS already has code to calculate and validate everything. That's how they know if you make an error on your taxes or failed to report something. All they need to do is refactor it and turn it into an application. That's not a trivial effort, but all the functional code has already been written by the IRS. My impression is that most of the cost of development for Intuit and H&R is keeping up to date with changes in the tax code (and possibly updating data import methods, since those are controlled by 3rd parties and may change). The IRS already has to do the same data checking and cross-checking and import. Therefore, keeping tax prep privatized is a massive duplication of effort.
- sokoloff 3y ago
  > All they need to do is refactor it and turn it into an application. That's not a trivial effort, but all the functional code has already been written by the IRS. That "not trivial effort" sure sounds like "will not be free – not free to build, not free to operate, and not free for taxpayers" to me. Don't get me wrong; I'm entirely in favor of this action, but I have no illusion that it will be free to build, nor free to operate, nor free for taxpayers.
  - harshreality 3y ago
    The point is that the bulk of the cost is already duplicated. When was the last time Turbotax's UI had a major revamp? The conservative narrative is, "Intuit and H&R do this so IRS doesn't have to. Isn't it nice that you don't have to pay more for your tax prep software because the private sector is so efficient?" No, we pay Intuit (or H&R or an actual accountant), and the federal government also spends money so the IRS can develop essentially the same functional code to check tax returns that the third party is preparing according to the same rules. In 2006 during the primaries, one of Obama's operatives floated $2 Bn as the cost of tax prep. Not all of that would be avoided by an IRS "free" e-filing app, but even if e-filing apps only represent 25%, it wouldn't take that long at $500 million per year to pay for the development of an app and refactoring IRS's existing code to be used in the app, even if it turns into a horribly inefficient project. How many billions can IRS spend on a turbotax killer without producing a turbotax killer?
NamTaf 3y ago
From a non-US perspective, hearing/reading about how tax returns work there is some kind of crazy Byzantine nightmare. In Aus, I file it through a free, online government portal. Most of my stuff is pre-filled: personal income, social support payments, bank interest, dividends/managed fund distributions, etc. Previous years' deductions are rolled over with relevant data pre-filled, which then prompts me to fill in the blanks through a series of steps. There's relevant depreciation calculators for various work-related purchases (laptops, cars, etc.) that all align with the tax office's advice around depreciation durations and rates. All of this is known because most (i.e. bigger) companies are required to hold your tax file number and report on salaries paid, pension contributions and withheld tax. If you don't give them your TFN, they tax you at the highest rate and then you will get the difference back upon filing a return. If it's not pre-filled, you get your data on a payment summary at the end of financial year and just put it in manually - again, it guides you through this. For a standard white collar worker, because my employer knows how much they're paying me, they can accurately estimate the total income I'll get over a year and thus accurately withhold tax. This means my tax return is generally pretty much a wash until deductions or extra income starts moving it, but that's only a couple of percent usually. For stuff like bank interest, you can choose to give them your TFN, or you can just enter it manually and the return process will calculate it out in the process. You can of course delete and re-enter any of the pre-filled information if it's somehow wrong. You're not under any obligation to use the pre-filled data. The upshot of this is that for the overwhelming majority of people who don't have complicated tax arrangements, it's entirely possible to do it all by yourself, for free. You are of course always able to have an accountant do it for you (the system has processes for them to file a return on your behalf). The underlying principle is that everyone can in theory do their own tax return no matter how complex, though of course that means reading up on a lot of the tax code (the tax office tries to provide relevant examples of how the various rules work). But if you're a standard white collar employee working a 9-5 with some basic investments (e.g. your pension and a small stock portfolio, maybe an investment property if you want to throw in some non-prefilled complexity, and you've got some basic deductions such as through donations and work expenses) it's going to be pretty easy to do with a few hours' research, max. Hell, I think I could still even use the paper forms for this all, but why? I suspect that US readers will, on average, baulk at this level of government oversight and the idea that big brother sees all of your income, etc. but the reality is it's still possible to do cash-in-hand jobs and lie on your return so if you're in for a penny re: committing tax fraud, you may as well be in for a pound. Besides, the main way of doing the dodgy on your tax return in Australia is via declaring deductions that you're not fully entitled to (e.g. 100% deduction of your mixed work/personal phone, rather than just the pro-rata amount of use for work) and hoping that you don't stand out too much on a statistical analysis to be audited.
benguild 3y ago
Now that we have technology can’t taxes just be automatic when transactions happen?
- sokoloff 3y ago
  First, you'd have to ban cash. Second, you'd have to give up substantial amounts of privacy (both related and unrelated to the banning of cash). As an example, to make taxes automatic, you would have to annotate each electronic transaction with its taxable treatment. If I buy a ticket on Delta to go on vacation, that has one tax treatment (no effect). If I buy that same ticket on Delta to go on a business trip, that has a different tax treatment. (Further, I would wager that telling airlines which scenario it is would not be helpful in terms of ticket pricing/terms.) If I buy a sandwich on vacation vs that same sandwich on a business trip, different tax treatments...(and the business trip airline ticket even has a different tax treatment than the business trip sandwich).
i_like_pie1 3y ago
good. turbotax can/should be checked
miki123211 3y ago
Why hasn't a non-profit build this before? If Intuit can build a system and charge for it, it should be entirely possible to build it as open source, software, and it's the kind of think that some non-profits would probably go for. THe IRS will have a slightly easier time building a system like this, as they can pre-fill some of the data that they already have, but it should still be possible to at least match Intuit here. It feels like this is an area where competition would be a good thing. The IRS's system might be good or it might be bad. If the job was done by NGOs, you could have multiple systems, all learning from each other's successes and failures, and users would choose the one that is the most intuitive. Maybe a better idea would be to give taxpayer data to non-profits (after user authentication and consent, of course.)
miki123211 3y ago
Don't tax authorities have an incentive to minimize tax returns and maximize taxes paid? Just like in for-profit companies, there's a temptation to employ dark patterns here. These systems have been developed in other countries and I don't think this problem exists, even though it intuitively should.
tombert 3y ago
About a year ago, I got audited by the IRS. It was 100% my fault; I had sold a good chunk of stock in 2020 and but forgot to report the capital gains on my tax form (a tax form that was, evidently, automatically approved by the fed in about ten minutes!). So last year I got a bill in the mail for $8,000; $7,000 for the actual taxes I owed, and a $1,000 fine. I was able to call and get the fine lowered (thanks to advice I received in HN actually!) and I wasn't "angry" with anyone but myself. I did owe the money, I didn't blame the IRS for wanting it. But it did kind of make me wonder something: if the government was able to find out that I screwed up on my taxes, then why am I doing anything? Clearly they have all the data and information necessary to determine how much I actually owed, and clearly they were able to spot my mistake, so why make me pay $60 for TurboTax at all? Why not just send me a bill or refund every year? This is a step in the right direction.
- robomartin 3y ago
  Because what they don't do is make sure you get all the deductions you are entitled to receive. Like it or not, tax law is complex. This is where a good CPA is worth whatever they might charge to do the work.
  - tombert 3y ago
    I did actually get a human to do my taxes for me this year. It wasn't even that much more expensive, though I think I don't generally do anything too crazy deduction-wise.
  - Avamander 3y ago
    It doesn't have to be complex though, like it or not.
    - robomartin 3y ago
      Agreed. Yet, tax law is complex. And we are not going to simplify it any time soon. We can't even build a damn high speed train, let's not pretend this country can get anything of note done these days. So, yeah, reality-vs-fantasy?
dataflow 3y ago
Kind of unrelated, but didn't the IRS also "move forward" with login.gov integration? Wherever did that go?
at_a_remove 3y ago
I'm interested, but cautious. I'd probably let some other folks find the bugs in the system. Yes, it costs me a little money. I'm just really avoidant of something like an audit and would rather do the tried-and-true until the new thing is up to snuff.
bigfryo 3y ago
Our government has definitely shows that they can implement complex websites
londgine 3y ago
I hope this will work for expats. America doesn't allow changing residency, and annulling citizenship costs upward of $1,000. Yet we have to pay taxes, and to avoid being double taxed in everything (but still double taxes in some) you have to use expensive tax software to file your taxes.
josephd79 3y ago
Great, finally working on getting rid of the scam companies.

462 points by DocFeind 3y ago

I'd also like to add that I hope all tax prep companies crash and burn and everybody loses their jobs. They are parasites.

mydriasis 3y ago

> Intuit spent at least $25.6 million since 2006 on lobbying, H&R Block about $9.6 million and the conservative Americans for Tax Reform roughly $3 million. > In contrast, the NAACP has spent $140,000 lobbying on “free-file” since 2006 and Public Citizen has spent $110,000 in the same time frame. With two orders of magnitude of lobbying dollars difference on either side, I'm surprised this is going anywhere. > “An IRS direct-to-e-file system is redundant and will not be free – not free to build, not free to operate, and not free for taxpayers,” Plummer (a spokesman for Intuit) said, adding that it “will unnecessarily cost taxpayers billions of dollars.” Oh, like the system your company built and lobbies for? How do you say stuff like this out loud without your pants bursting into flames on the spot?

andybak 3y ago
Imagine if they spent that money on, you know, making a better product.
- snarf21 3y ago
  But lobbying has such better ROI!! .. We also need lawys from the federal level that all these "known" things must be pushed to the IRS and the state and local use that as their source of information .. Then this software just needs to deal with federal deductions that aren't digital or optional like charity .. We have such a dumb system
- asah 3y ago
  Alas, free would still win enough marketshare for it to make sense to spend on lobbyists to delay this. :-(
- stetrain 3y ago
  They seem to spend all of their money adding fake slow progress bars that advertise their premium version to you.
- lIl-IIIl 3y ago
  They would have a better product, but they'd be out of business since without lobbying against it, the government product would actually be built.
- jfengel 3y ago
  The product is fine. It doesn't really need radical improvements. That money should have been returned to shareholders. What it needs is to not exist. The product does a fine job of doing an unnecessary thing. For the vast majority of users it should be a tax bill or refund check that arrives with no user intervention at all. The remaining use cases should be handled differently -- perhaps by a professional. That professional may themselves want such software, but it's likely a different interaction than software also aimed at users with much simpler use cases.
denimnerd42 3y ago
I'm not arguing one way or another but one point the tax software companies do have is who pays the cost. In the commercial product arena, the products are bought by people who make over median wage. The lower income folks have simpler taxes usually. The free products cover them generally. I may be wrong but that's how I see it. I didn't feel the need to pay for any software until I was making a lot of money (relative to median) and managing a lot of assets.
- rhaway84773 3y ago
  And you pointed out exactly what the problem with the current system is. The rich can pay someone to do the work for them. This saves them time, stress, energy, etc. The poor cannot. They have to do all this themselves and then they’re open to the risk of actually getting something wrong. And the impact of getting something wrong is highly imbalanced. If they get something wrong and end up paying more tax than they need to there will never be a second thought given to it. But if they mess up and pay less taxes than they should they will be hit with a penalty, interest, and even maybe an audit. And the idea that everyone should be reasonably competent in taxes seems a little ridiculous to be honest especially when no one is taught how to do taxes in any point in their lives. An alternative might be to teach how to do taxes in school, but at that point the cost of teaching taxation would far exceed the cost of developing this software, never mind the human hours that are wasted.
  - ndriscoll 3y ago
    > If they get something wrong and end up paying more tax than they need to there will never be a second thought given to it. Anecdotally, I messed up copying tax owed from the table a couple years back, and the IRS sent me a letter telling me I made a mistake and overpaid, along with a check for the difference. In any case, a lot of the complication in the tax code comes down to the government incentivizing certain behaviors, so it makes sense that we should put more focus on teaching people to read the rules and find out what those incentives are. Of course a free calculation tool to run simulations could help people to understand those rules, and we ought to make the actual filing more convenient for everyone.
NikolaNovak 3y ago
It's tricky. I can definitely foresee a future, based on governmental record in publicly-facing IT systems, where every single word of that statement is technically 100% true. First part is all but tautological - Of course it won't s not free to build or operate; and thus it wouldn't be "free for taxpayers" in the most technical sense (this doesn't mean it wouldn't be excellent value or save money overall or even cost more money but save it where it counts). It's the last sentence (unnecessarily cost taxpayers billions) that could go either way. This could in principle end up an efficient and effective, easy to use and helpful well performing system that's a brilliant investment of public money. I hate to say it though, but it's also extremely possible it would cost a lot of money with nobody using it because it sucks. Besides, it feels like in the USA, IT systems are only a part of issue with tax system. Actual tax code and submission options are the bigger part.
- lowercased 3y ago
  We've had the last few years of one party demonizing the IRS, insisting they're "coming after" the little guy. I suspect trust in something like this is already starting on shaky ground before it's even rolled out, which may contribute to "it's such a waste - no one uses it!". Even if a substantial of people that need this the most (people least able to afford any filing fees), this will continue to be fought. :/
- willis936 3y ago
  Just because it's true doesn't fireproof their pants. They already operate a service that is not free to build operate, and we know beyond a shadow of a doubt costs taxpayers needless additional billions of dollars. So then why would the taxpayers not want to invest an alternative that could spend "needless billions" to save additional needless billions?
- theptip 3y ago
  Classic political rhetoric. Who cares about “free”? I’m already paying for TurboTax. This only needs to be cheaper.
  - deleted 3y ago
sitzkrieg 3y ago
im glad these shoe-in clowns are finally having to hopefully complete w fed direct free efiling
clucas 3y ago
>With two orders of magnitude of lobbying dollars difference on either side, I'm surprised this is going anywhere. I think everyone should use this to update their priors on the impact of lobbying. Government action is not contingent on a dollar vs dollar comparison. Citizens United did not result in a raft of unpopular legislation being passed. (Not saying it was the right decision, just that its impact was overstated.) We should all feel heartened that our government is responding to good arguments over lobbying dollars. Another one we should keep fighting on is Right to Repair. John Deere and the like can put as much money into the fight as they want - as long as we have people like Rossman being gadflies, sanity will win. Eventually.
- OkayPhysicist 3y ago
  Frankly, by far the biggest impact of lobbying happens when one side has anything at all, and the other side doesn't. Most lobbying isn't bribery, as much as it is spending money to get create a situation where the politician will listen to you explain your case. When the politician has heard both sides in such a manner, they'll basically vote with their conscience. When only one side has explained their argument, it's a lot easier for the politician to vote with that one.
  - nielsbot 3y ago
    We'd be happy to put lots of money into your reelection campaign if you'll hear us out. e.g. Bribery.
stonemetal12 3y ago
If I were Intuit, I would be spending that on making sure the IRS selected us as the sole provider of their free tax software. Then make sure it's slightly more annoying than using TurboTax so I could get paid twice for the same job.
- LapsangGuzzler 3y ago
  It would be an epic failure if the government issued a tax collection software contract out and didn’t put in some sort of clause preventing intuit from providing a competing service. I have a hard time seeing them do something like that.
daniel-cussen 3y ago
> “will unnecessarily cost taxpayers billions of dollars.” This is undisputably true. H&R Block n Intuit are taxpayers, n free-file will cost them billions of dollars. Being real, online taxes through the SII work great in Chile.
hot_gril 3y ago
It's not a crazy statement. I expect the IRS's system to be worse and more costly than TurboTax on the technical side, at least initially. But it's a step in the eventual right direction; I shouldn't need a third party to pay taxes.
throwawaymobule 3y ago
Are the NAACP/public citizen the highest value lobbyists for this? I would not have guessed, but makes sense reading it.

jmclnx 3y ago

Lets see, the US has a big election next year, early fund raising ? Since the Citizens United Ruling, political bribes are now legal in the US. I believe this system will only support the easiest of tax forms, the type any idiot can fill out. Have one of these: 401k, pretax medical/college accounts, stock dividends, non-US interest, income other then wages from commercial for-profit companies, you will be SOL. And I am sure many people can add to the list of these items. These are the items that make Tax Accountants the real money.

Spoom 3y ago
Nearly everything you mentioned automatically files paperwork with the IRS anyway. I'm not sure why you think that they could not be part of a pre-filled return.
- Volundr 3y ago
  I feel like this is a point that gets overlooked in the discussion. The IRS ALREADY has software that does your taxes. It's just that currently it's used to validate you did it correctly and they aren't going to tell you the results unless you did it wrong. Sure building this system isn't going to be as easy as "give our existing software a public URL", but there should be a lot of code reuse happening.
- e40 3y ago
  It's pretty clear why they think this, due to lobbying. I think everyone agrees none of those items should be grounds for not using this theoretical system.
lowercased 3y ago
I share some skepticism, but I suspect some basic stuff may be supported (out of the gate or soon) - IRA/401k info may not be too difficult, at least with data from major players (vanguard/fidelity/etc). I bought and sold two houses, moved between states, and our family had two businesses as well as W2 income - all this over an 18 month period. I went to an HR Block ('big name, offices in multiple states, etc') and they made a lot of mistakes, took about 2 years to unwind the mess.

bozhark 3y ago

> Republicans on the House Appropriations Committee in June proposed a budget rider that would prohibit funds to be used for the IRS to create a government-run tax preparation software, unless approved by a group of House and Senate committees. The move “safeguards the IRS from an obvious conflict of interest where the tax collector becomes the tax preparer,” the bill’s summary states. That’s a hard R in Republican

ellisv 3y ago
What a ridiculous take. Use of the software wouldn't be compulsory. The IRS already (mostly) knows what the payer owes.
- sokoloff 3y ago
  There are two problems with that: The one that affects most people is that the IRS system is "eventually consistent", but they do not currently have the information needed to file your return on the date your return is due. If you don't believe me, request your transcript-of-records* on your account filing date. Then request it again in early fall. The latter will, IME, be complete while the former will not. * - https://www.irs.gov/individuals/get-transcript https://www.irs.gov/individuals/get-transcript The one that affects only a subset of people is that many deductible items that go into tax returns are never shared with the IRS at all and only the taxpayer knows about them (today).
  - jedberg 3y ago
    You're technically correct, but in most cases the date the original form was filed with the IRS was around the deadline. It just takes them a while to upload them all. But we could also just make the filing deadline October for individuals. Most of those late arriving forms are K1s for partnerships that only file in April.
- JohnFen 3y ago
  Technically, the use of the software isn't compulsory. You can still fill out the physical tax forms and mail them in. That said, I am solidly on board with the IRS just computing the taxes for taxpayers and sending them a bill. Taxpayers who dispute the bill can then just file their own taxes as normal.

bigbillheck 3y ago

I've been using Free File Fillable Forms (https://www.freefilefillableforms.com https://www.freefilefillableforms.com) for several years now and look forward to whatever the IRS comes up with.

owenmarshall 3y ago
Same here – if you like doing your taxes on paper, AND you post on this site, you'll love it & it'll save you some cash over Turbotax/friends. I will say it isn't the most user friendly application, as evidenced by the error I received this year by email: Issue : Business Rule X0000-005 - The XML data has failed schema validation. cvc-complex-type.2.4.a. Invalid content was found starting with element `QualifiedCareExpensesPaidAmt`. One of `{"http://www.irs.gov/efile":IdentityProtectionPIN, "http://www.irs.gov/efile":QualifyingPersonSSN, "http://www.irs.gov/efile":DiedLiteralCd}` is expected. The following information may help you determine the form at issue: Field/Xpath: /efile:Return[1]/efile:ReturnData[1]/efile:IRS2441[1]/efile:QualifyingPersonGrp[2]/efile:QualifiedCareExpensesPaidAmt[1] It did help me find the form & line at issue instantly, but I'm not sure a non-programmer would have as much luck.

seventytwo 3y ago

Good.

enterthematrix 3y ago

Intuit is a bunch of vampires stealing money from Americans. Every developed country in the world has a relatively easy tax system for citizens, but only the US operates in this insane way where they willingly tax citizens by not providing them with an easy way to do taxes, and instead sends them to the wolves of Intuit and others.

Nifty3929 3y ago
Why blame intuit for our crappy tax policy? Sure, they might lobby for more complexity, but the legislators that we elected pass the laws.
- Kalium 3y ago
  Intuit is directly responsible for a long and aggressive lobbying effort to keep tax filing expensive and privately run.
  - hellojesus 3y ago
    Yes, but any public representative should easily see past that nonsense. It's their entire job.
  - sokoloff 3y ago
    My kids are directly responsible for a long and aggressive lobbying effort to eat ice cream every night. Because we are effective parents and do our job, they don't get their way. I can't see why our elected representatives can't manage to act with the same level of responsibility.
    - landemva 3y ago
      Those voting won't recall the politicians because the people are distracted by the latest divisive outrage.
    - cmdli 3y ago
      Do you expect voters to switch sides of the aisle over this issue? If not, then politicians have no reason not to take industry money. After all, if you have access to all the campaign and other funds without losing voters, then it would be idiotic not to follow the money.

BurningFrog 3y ago

I don't want a free tax filing system. I want the IRS to give me form - paper or digital - with the data they already know from my employer, bank, etc already in. I'd be happy to enter the other things myself.

ellisv 3y ago
They will if you get it wrong enough.
- atlasunshrugged 3y ago
  Having just received a letter in the mail saying I owe an extra ~$850 from 2020 I can confirm this is the case!
  - RetpolineDrama 3y ago
    Did they say what for?
    - atlasunshrugged 3y ago
      They probably did at an extremely high level, I already paid and threw it away (which was silly... don't do tax stuff when mentally exhausted) but it certainly had no specific details or context on how they arrived at that conclusion, what exactly was wrong, etc. It did have some very serious statements about failure to pay, increased penalties for late fees, etc. and having tried to call the IRS in the past, I know that it's worse than pulling teeth to get real answers so I decided this fight wasn't worth it. That said, I have also had them come back before with a mistake on their end and a check I wasn't expecting so my current mental model for the IRS is that they are honest brokers in general, just really really slow.
    - ellisv 3y ago
      They will say what for and give you the opportunity to dispute it. You can even call and talk with someone. They aren't faceless, heartless, or infallible. If it's their mistake, or an honest mistake on your part, they're pretty easy to work with.

toomuchtodo 3y ago

Between this and FedNow, US public goods are firing on all cylinders. You love to see it.

polski-g 3y ago
FedNow is still private sector, its ran by private banks. There is nowhere with a .gov domain you can go to, to send money to another US citizen.
- toomuchtodo 3y ago
  Federal Reserve operates at the direction of Congress, who also directed them to build FedNow. FedNow is operated as a utility with a cost recovery (vs profit) model. Ergo, public good. https://www.federalreserve.gov/aboutthefed/fract.htm https://www.federalreserve.gov/aboutthefed/fract.htm https://www.pymnts.com/news/b2b-payments/2019/house-committee-fed-fednow-real-time-payments/ https://www.pymnts.com/news/b2b-payments/2019/house-committe...

lxe 3y ago

As much as I love not having to use paid filing software, I don't expect the federal government to create something that isn't incredibly frustrating to use that costs way too much to build

ourmandave 3y ago
I wonder if the help system for it will be AI based.
robszumski 3y ago
As a founder, some of the federal and state software for registering in various states, workers comp, etc and the estimated tax process as an individual is surprisingly decent. It's not great, but the state and federal level stuff is generally ok.
- deleted 3y ago
  [deleted]
- rufus_foreman 3y ago
  A couple years ago, the IRS didn't pay my income tax refund for six months, and during that time they couldn't tell me why they weren't paying, when or if they were going to pay it, what the status was, whether there was anything wrong, or when they would have any information on what the status was, and this was after waiting for many, many, many hours to get in contact with the person that wasn't going to tell me anything at all. And this is the IRS that wanted me to provide them with a selfie in order to make estimated income tax payments online. That is pretty far from OK. I will be paying for tax preparation software one way or the other, I would much rather pay the private sector so that I have a choice if I don't like a particular application.
hedgehog 3y ago
The financial sector is the clear winner in who makes worse user-facing software though. I've interacted with a whole variety of US government services from federal to city and they're on average better than the garbage I have to use for back end management related to bills and various investments. Consumer tax software is downright user-hostile.

ourmandave 3y ago

If you qualify, IRS will already figure your taxes for you. https://www.irs.gov/taxtopics/tc552 https://www.irs.gov/taxtopics/tc552 I wonder what happens if they make a mistake?

junar 3y ago
That's not the same thing. For the process referenced by your link, the taxpayer would still need to fill in most lines, only leaving a few calculation lines blank for the IRS to finish. > If you want the IRS to figure your tax. Read Form 1040 or 1040-SR, lines 1 through 15, and Schedule 1 (Form 1040), if applicable. Fill in the lines that apply to you and attach Schedule 1 (Form 1040), if applicable. Don’t complete Form 1040 or 1040-SR, line 16 or 17. > If you are filing a joint return, use the space on the dotted line next to the words “Adjusted Gross Income” on the first page of your return to separately show your taxable income and your spouse's taxable income. > Read Form 1040 or 1040-SR, lines 19 through 33, and Schedules 2 and 3 (Form 1040), if applicable. Fill in the lines that apply to you and attach Schedules 2 and 3 (Form 1040), if applicable. Don’t fill in Form 1040 or 1040-SR, lines 22, 24, 33, or 34 through 38. Don’t fill in Schedule 2 (Form 1040), line 1 or 3. Also, don’t complete Schedule 3 (Form 1040), line 6d, if you are completing Schedule R (Form 1040), or Form 1040 or 1040-SR, line 27, if you want the IRS to figure the credits shown on those lines. https://www.irs.gov/publications/p17#en_US_2022_publink1000174236 https://www.irs.gov/publications/p17#en_US_2022_publink10001... Also, it comes with several limitations. > When the IRS cannot figure your tax. The IRS can’t figure your tax for you if any of the following apply. > You want your refund directly deposited into your checking or savings account ... https://www.irs.gov/publications/p17#en_US_2022_publink1000174225 https://www.irs.gov/publications/p17#en_US_2022_publink10001...

WaitWaitWha 3y ago

I have a solution that both sides will hate. Reduce the complexity and size of the tax code to the point where an average taxpayer can complete it.

mdaniel 3y ago
I'll see your 'reduce complexity' and raise you "laws that compute things and have hyperlinks to other parts of the law should be written in a programming language" or even a con-lang designed for specificity. Hell, it's even called "the U.S. Code". I believe there's some precedent from the French but I believe it's a proof of concept: https://arxiv.org/pdf/2103.03198.pdf https://arxiv.org/pdf/2103.03198.pdf https://hn.algolia.com/?q=catala https://hn.algolia.com/?q=catala The asterisk to such a thing is that my understanding is that "ignorance of the law is no excuse" so changing from the official language of the country over to ... something else ... runs the risk of bringing back a "the clergy reads the laws and tells you what it says" style setup, but TBH even right now with the IRS tax code written in English I still cannot reasonably read it and conceptually author my own copy of Turbo Tax so I'll take my chances with the unintended consequences hazard

em3rgent0rdr 3y ago

"Free" should mean free of complexity. The big cost of doing taxes is not in submitting the taxes, but rather is the enormous byzantine complexity of calculating how much you owe.

kevinventullo 3y ago

Nowadays I outsource my tax prep to a professional, but I’d still be happy if this system can serve the folks with the easiest-to-file taxes. I don’t even care about the economic ROI, it just seems like a nice thing to have in a relatively wealthy country, like parks or libraries.

dang 3y ago

Related: IRS tests free e-filing system that could compete with tax prep giants - https://news.ycombinator.com/item?id=35950836 https://news.ycombinator.com/item?id=35950836 - May 2023 (567 comments) Call on the IRS to provide libre tax-filing software - https://news.ycombinator.com/item?id=35705469 https://news.ycombinator.com/item?id=35705469 - April 2023 (129 comments) 60M Americans have taxes so simple the IRS could do them automatically - https://news.ycombinator.com/item?id=35476709 https://news.ycombinator.com/item?id=35476709 - April 2023 (277 comments) Lobbyists begin chipping away at Biden’s $80B IRS overhaul - https://news.ycombinator.com/item?id=35381701 https://news.ycombinator.com/item?id=35381701 - March 2023 (214 comments) Intuit pouring money into lobbying amid push for free government-run tax filing - https://news.ycombinator.com/item?id=34840039 https://news.ycombinator.com/item?id=34840039 - Feb 2023 (178 comments) IRS builds task force to explore running its own free e-file system - https://news.ycombinator.com/item?id=34764952 https://news.ycombinator.com/item?id=34764952 - Feb 2023 (199 comments) IRS Free File: Do Your Taxes for Free - https://news.ycombinator.com/item?id=34462122 https://news.ycombinator.com/item?id=34462122 - Jan 2023 (247 comments) IRS will look into setting up a free e-filing system - https://news.ycombinator.com/item?id=32753099 https://news.ycombinator.com/item?id=32753099 - Sept 2022 (408 comments) The IRS could be on the verge of changing the way Americans file their taxes - https://news.ycombinator.com/item?id=32550841 https://news.ycombinator.com/item?id=32550841 - Aug 2022 (17 comments) IRS will study free tax filing options - https://news.ycombinator.com/item?id=32502321 https://news.ycombinator.com/item?id=32502321 - Aug 2022 (25 comments) TurboTax’s fight against free tax filing - https://news.ycombinator.com/item?id=31072202 https://news.ycombinator.com/item?id=31072202 - April 2022 (394 comments) Filing taxes could be free & simple. H&R Block & Intuit lobby against it (2017) - https://news.ycombinator.com/item?id=30856968 https://news.ycombinator.com/item?id=30856968 - March 2022 (114 comments) FTC sues Intuit for its deceptive TurboTax “free” filing campaign - https://news.ycombinator.com/item?id=30846071 https://news.ycombinator.com/item?id=30846071 - March 2022 (587 comments) Ask HN: How does TurboTax get away with dark patterns? - https://news.ycombinator.com/item?id=30409523 https://news.ycombinator.com/item?id=30409523 - Feb 2022 (122 comments) Why do Americans have to pay much to file their tax returns when the IRS knows? - https://news.ycombinator.com/item?id=30267361 https://news.ycombinator.com/item?id=30267361 - Feb 2022 (22 comments) Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Lobby Against It (2017) - https://news.ycombinator.com/item?id=30185484 https://news.ycombinator.com/item?id=30185484 - Feb 2022 (18 comments) California tried to save the nation from tax filing, then Intuit stepped in - https://news.ycombinator.com/item?id=28944200 https://news.ycombinator.com/item?id=28944200 - Oct 2021 (283 comments) The IRS has a big opportunity to fix the way Americans file taxes - https://news.ycombinator.com/item?id=28177289 https://news.ycombinator.com/item?id=28177289 - Aug 2021 (12 comments) ... plus dozens more: https://news.ycombinator.com/item?id=35970518 https://news.ycombinator.com/item?id=35970518

nonethewiser 3y ago

Controversial take for all of you: US taxes arent complicated because of tax software lobbiests. In fact they are already very simple if you actually value simplicity. But people dont - they value paying the least in taxes as possible (as they should). You can dumbly supply a small amount of information and be in complete compliance with the law. Virtually all complexity comes from proving ways in which you don't owe taxes and calculating how much. Thus, reducing complexity necessarily increases taxes for most cases. That means reducing complexity will always have lots of normal people rationally opposing it. Tax complexity reductions need to be accompanied by tax cuts across the board.

tristor 3y ago
Unfortunately your take is wrong, rather than controversial. I do my taxes every year, sometimes long-form, sometimes with software like TurboTax. The complexity of my taxes is entirely the fault of the way in which I am required to provide information to the IRS, most of which they already know, even though I take the standard deduction and don't do any "tricks". A simply example is if you have any sort of stocks/bonds or other tradeable asset holdings. Reporting this is a massive pain in the ass, because despite the fact that Schwab/Etrade/et-al already report this to the IRS, they make you list the cost basis, date of purchase, and sale price of every transaction that occurred within the tax year as part of calculating whether or not you're eligible for long-term capital gains or are taxed at your marginal income tax rate (short term capital gains). Very closely related is transactions dealing with RSUs, which every tech worker (most of HN) has to deal with. This is despite the fact I work a relatively normal white collar job on a W-2 and don't even file a base 1099 on a yearly basis. Taxes are complicated in the US because our tax code is bonkers and we're forced to precisely input a whole lot of spreadsheet bullshit that the IRS already knows so they can auto-check our work against their database rather than just telling me I owe them an extra $2k because despite having maximum withholding, the government wants to fuck me a little deeper in the ass. Exactly none of this is optional, I am /obligated/ to report all of this complexity, whether I paid enough or not, or I am legally penalized. Taxes /could/ be simple, but they are not, for anyone who makes more than about $60k/yr, which is nearly half the country. > You can dumbly supply a small amount of information and be in complete compliance with the law. This is not only factually untrue, anyone who follows this advice is putting themselves in significant legal jeopardy.

harshreality 3y ago

> “An IRS direct-to-e-file system is redundant and will not be free – not free to build, not free to operate, and not free for taxpayers,” Plummer said, adding that it “will unnecessarily cost taxpayers billions of dollars.” There's no reason why this has to be true. It might be true, but only due to inefficiencies. The IRS already has code to calculate and validate everything. That's how they know if you make an error on your taxes or failed to report something. All they need to do is refactor it and turn it into an application. That's not a trivial effort, but all the functional code has already been written by the IRS. My impression is that most of the cost of development for Intuit and H&R is keeping up to date with changes in the tax code (and possibly updating data import methods, since those are controlled by 3rd parties and may change). The IRS already has to do the same data checking and cross-checking and import. Therefore, keeping tax prep privatized is a massive duplication of effort.

sokoloff 3y ago
> All they need to do is refactor it and turn it into an application. That's not a trivial effort, but all the functional code has already been written by the IRS. That "not trivial effort" sure sounds like "will not be free – not free to build, not free to operate, and not free for taxpayers" to me. Don't get me wrong; I'm entirely in favor of this action, but I have no illusion that it will be free to build, nor free to operate, nor free for taxpayers.
- harshreality 3y ago
  The point is that the bulk of the cost is already duplicated. When was the last time Turbotax's UI had a major revamp? The conservative narrative is, "Intuit and H&R do this so IRS doesn't have to. Isn't it nice that you don't have to pay more for your tax prep software because the private sector is so efficient?" No, we pay Intuit (or H&R or an actual accountant), and the federal government also spends money so the IRS can develop essentially the same functional code to check tax returns that the third party is preparing according to the same rules. In 2006 during the primaries, one of Obama's operatives floated $2 Bn as the cost of tax prep. Not all of that would be avoided by an IRS "free" e-filing app, but even if e-filing apps only represent 25%, it wouldn't take that long at $500 million per year to pay for the development of an app and refactoring IRS's existing code to be used in the app, even if it turns into a horribly inefficient project. How many billions can IRS spend on a turbotax killer without producing a turbotax killer?

NamTaf 3y ago

From a non-US perspective, hearing/reading about how tax returns work there is some kind of crazy Byzantine nightmare. In Aus, I file it through a free, online government portal. Most of my stuff is pre-filled: personal income, social support payments, bank interest, dividends/managed fund distributions, etc. Previous years' deductions are rolled over with relevant data pre-filled, which then prompts me to fill in the blanks through a series of steps. There's relevant depreciation calculators for various work-related purchases (laptops, cars, etc.) that all align with the tax office's advice around depreciation durations and rates. All of this is known because most (i.e. bigger) companies are required to hold your tax file number and report on salaries paid, pension contributions and withheld tax. If you don't give them your TFN, they tax you at the highest rate and then you will get the difference back upon filing a return. If it's not pre-filled, you get your data on a payment summary at the end of financial year and just put it in manually - again, it guides you through this. For a standard white collar worker, because my employer knows how much they're paying me, they can accurately estimate the total income I'll get over a year and thus accurately withhold tax. This means my tax return is generally pretty much a wash until deductions or extra income starts moving it, but that's only a couple of percent usually. For stuff like bank interest, you can choose to give them your TFN, or you can just enter it manually and the return process will calculate it out in the process. You can of course delete and re-enter any of the pre-filled information if it's somehow wrong. You're not under any obligation to use the pre-filled data. The upshot of this is that for the overwhelming majority of people who don't have complicated tax arrangements, it's entirely possible to do it all by yourself, for free. You are of course always able to have an accountant do it for you (the system has processes for them to file a return on your behalf). The underlying principle is that everyone can in theory do their own tax return no matter how complex, though of course that means reading up on a lot of the tax code (the tax office tries to provide relevant examples of how the various rules work). But if you're a standard white collar employee working a 9-5 with some basic investments (e.g. your pension and a small stock portfolio, maybe an investment property if you want to throw in some non-prefilled complexity, and you've got some basic deductions such as through donations and work expenses) it's going to be pretty easy to do with a few hours' research, max. Hell, I think I could still even use the paper forms for this all, but why? I suspect that US readers will, on average, baulk at this level of government oversight and the idea that big brother sees all of your income, etc. but the reality is it's still possible to do cash-in-hand jobs and lie on your return so if you're in for a penny re: committing tax fraud, you may as well be in for a pound. Besides, the main way of doing the dodgy on your tax return in Australia is via declaring deductions that you're not fully entitled to (e.g. 100% deduction of your mixed work/personal phone, rather than just the pro-rata amount of use for work) and hoping that you don't stand out too much on a statistical analysis to be audited.

benguild 3y ago

Now that we have technology can’t taxes just be automatic when transactions happen?

sokoloff 3y ago
First, you'd have to ban cash. Second, you'd have to give up substantial amounts of privacy (both related and unrelated to the banning of cash). As an example, to make taxes automatic, you would have to annotate each electronic transaction with its taxable treatment. If I buy a ticket on Delta to go on vacation, that has one tax treatment (no effect). If I buy that same ticket on Delta to go on a business trip, that has a different tax treatment. (Further, I would wager that telling airlines which scenario it is would not be helpful in terms of ticket pricing/terms.) If I buy a sandwich on vacation vs that same sandwich on a business trip, different tax treatments...(and the business trip airline ticket even has a different tax treatment than the business trip sandwich).

i_like_pie1 3y ago

good. turbotax can/should be checked

miki123211 3y ago

Why hasn't a non-profit build this before? If Intuit can build a system and charge for it, it should be entirely possible to build it as open source, software, and it's the kind of think that some non-profits would probably go for. THe IRS will have a slightly easier time building a system like this, as they can pre-fill some of the data that they already have, but it should still be possible to at least match Intuit here. It feels like this is an area where competition would be a good thing. The IRS's system might be good or it might be bad. If the job was done by NGOs, you could have multiple systems, all learning from each other's successes and failures, and users would choose the one that is the most intuitive. Maybe a better idea would be to give taxpayer data to non-profits (after user authentication and consent, of course.)

miki123211 3y ago

Don't tax authorities have an incentive to minimize tax returns and maximize taxes paid? Just like in for-profit companies, there's a temptation to employ dark patterns here. These systems have been developed in other countries and I don't think this problem exists, even though it intuitively should.

tombert 3y ago

About a year ago, I got audited by the IRS. It was 100% my fault; I had sold a good chunk of stock in 2020 and but forgot to report the capital gains on my tax form (a tax form that was, evidently, automatically approved by the fed in about ten minutes!). So last year I got a bill in the mail for $8,000; $7,000 for the actual taxes I owed, and a $1,000 fine. I was able to call and get the fine lowered (thanks to advice I received in HN actually!) and I wasn't "angry" with anyone but myself. I did owe the money, I didn't blame the IRS for wanting it. But it did kind of make me wonder something: if the government was able to find out that I screwed up on my taxes, then why am I doing anything? Clearly they have all the data and information necessary to determine how much I actually owed, and clearly they were able to spot my mistake, so why make me pay $60 for TurboTax at all? Why not just send me a bill or refund every year? This is a step in the right direction.

robomartin 3y ago
Because what they don't do is make sure you get all the deductions you are entitled to receive. Like it or not, tax law is complex. This is where a good CPA is worth whatever they might charge to do the work.
- tombert 3y ago
  I did actually get a human to do my taxes for me this year. It wasn't even that much more expensive, though I think I don't generally do anything too crazy deduction-wise.
- Avamander 3y ago
  It doesn't have to be complex though, like it or not.
  - robomartin 3y ago
    Agreed. Yet, tax law is complex. And we are not going to simplify it any time soon. We can't even build a damn high speed train, let's not pretend this country can get anything of note done these days. So, yeah, reality-vs-fantasy?

dataflow 3y ago

Kind of unrelated, but didn't the IRS also "move forward" with login.gov integration? Wherever did that go?

at_a_remove 3y ago

I'm interested, but cautious. I'd probably let some other folks find the bugs in the system. Yes, it costs me a little money. I'm just really avoidant of something like an audit and would rather do the tried-and-true until the new thing is up to snuff.

bigfryo 3y ago

Our government has definitely shows that they can implement complex websites

londgine 3y ago

I hope this will work for expats. America doesn't allow changing residency, and annulling citizenship costs upward of $1,000. Yet we have to pay taxes, and to avoid being double taxed in everything (but still double taxes in some) you have to use expensive tax software to file your taxes.

josephd79 3y ago

Great, finally working on getting rid of the scam companies.