4 ms·

I think a lot of people who complain about the complexity of the US tax code and the "need" for TurboTax would benefit from directly filling out the 1040 by han

I think a lot of people who complain about the complexity of the US tax code and the "need" for TurboTax would benefit from directly filling out the 1040 by hand one year - most of them would have a pretty easy time doing it. For most people, all you need is a 4-function calculator, your W-2s/1099s, and a pencil, and it will take at most an hour or so. Where the IRS's UX is really bad for the average taxpayer is all the other forms and instructions that Americans feel the need to read and think about despite none of them applying to your situation. However, I think this is mostly psychological, and Americans are wasting their time and money trying to get ahead by finding a "loophole" that applies to them.

thfuran 3y ago
>and it will take at most an hour or so. And that's absolutely insane. That's tens of millions of man hours per year spent essentially on rote data entry of data that the IRS already has so that you can submit it to the IRS for them to check against their copy.
- ghaff 3y ago
  I would like to think that even if the IRS were to send me some numbers, I'd still spend an hour or so checking them against my own information.
  - JohnFen 3y ago
    I know that I wouldn't, because I don't want to. I'd just pay the amount the IRS says I should pay and call it good. I'd probably be paying more tax than absolutely necessary, but I honestly wouldn't mind that at all -- especially because I'd be saving money over doing the taxes myself (in the sense of time == money) or paying someone else to do them for me.
    - pclmulqdq 3y ago
      I mean, if the IRS was wrong about your income and you got audited, you would probably still be on the hook for penalties and back taxes. You're still going to want to spend some time checking that tax form pretty thoroughly.
      - JohnFen 3y ago
        True, but the same is also true if a tax preparer makes a mistake. Also, the IRS almost always waives penalties (and often interest) unless they think it wasn't an honest mistake. I'm not bothered by this risk. If a mistake is made and I owe additional taxes, then I'll just pay what I owe. No biggie.
        pclmulqdq 3y ago
        I mean, that is a hell of a life choice, but I guess if you assume that the government is always honest (see the Iraq war and many other things) and the IRS always interprets the documents they receive correctly (which they don't today - I have gotten letters from them which are blatantly wrong), that sounds good. I understand that an hour is valuable, but that hour you spend checking your tax documents may be the highest-leverage hour of work you do that year.
        JohnFen 3y ago
        > that is a hell of a life choice This implies that I'm taking some huge risk or would be absurdly overpaying my taxes or something. I don't think either of those things are true. In the larger picture, this isn't really that big of a deal. > I guess if you assume I assume none of those things. > that hour you spend checking your tax documents may be the highest-leverage hour of work you do that year. It would be more than an hour, but the time isn't even the biggest issue. The biggest issue is the stress, worry, and hassle. It's just a basic cost/benefit calculation here, no different than other cases where I accept a level of increased expense or some risk because it costs more than I'm willing to pay to mitigate it. I have bigger fish to fry than this. Micromanaging this would reduce my overall happiness by adding an additional thing to worry about. Everyone's cost/benefit calculation is different, of course, and if yours indicates that you'd be better off being more diligent about this stuff, that's entirely fair as well.
  - thfuran 3y ago
    It shouldn't take nearly as long to verify if it's presented at all reasonably.
ghaff 3y ago
Frankly, this whole thread is evidence of that. There's been a meme since before Intuit existed that tax prep in the US is akin to performing brain surgery on yourself. I do have enough oddball schedules these days that having an accountant is almost certainly a good idea but, honestly, I piggybacked on my parents' accountant for many years when I probably didn't really have a good reason to. A lot of people have just convinced themselves that getting a Turbotax update or going to the H&R Block booth at Walmart is just one of those annual rituals you have to do if you're sensible.
hedora 3y ago
I used to do it with just the 1040 and a spreadsheet. The problem with that is that there are literally 100 crazy-assed questions that I have to answer in order to fill out all the supplementary worksheets, etc. For instance: I bought a used EV. Do I take the tax break? Is it a deduction or credit? Figuring that out will take at least 10 minutes after you find the right IRS bulletin. Also, we have a roboadvisor, which means we hit all the corner cases for investment income. Even with turbotax, it takes about 8 hours for our moderately complicated taxes. Just getting the basic stuff that any homeowner with a family has to do takes 2-3. On top of that, the first year I used turbotax, I found out I had been overpaying ~$200-500 the previous 4 years. Filing amended returns wasn’t worth it, but paying the intuit mafia would have saved me time and money in the long run. If I had my way, we would move to a UBI and a flat tax (on income and capital gains). That reduces the tax code to a two variable equation of a line. I’d take a scatterplot of the 30-90th percentile of the US’s effective tax rates, and fit the line to that data set with a linear regression. In addition to creating basic income, this would ensure that the ultra wealthy actually pay taxes.
- pclmulqdq 3y ago
  I would suggest that you are almost certainly in the top 5% on complexity of your tax situation between the roboadvisor, the house, and the EV, if not all of the other things that you are spending 8 hours on. You may be in the top 1% on number of pages in your federal tax return. Personally, I would love a flat tax, although I would probably pay more under that system. It will never happen, though.
- TimPC 3y ago
  I think UBI and flat tax are fundamentally incompatible. Reasonable levels of UBI require high taxes, and doing so with entirely flat taxes will be quite punitive on the middle class. I think the vast majority of the population think there is a lot of merit to graduated tax rates as well, charging 50% tax on all of someone's income above $10,000,000 isn't as punitive to any sort of living standard as charging 50% tax on someone's first $30k of income. If we want a UBI of $24,000/year ($2,000/month) for an adult population of 250 million we are talking 6 trillion dollars in additional government spending. Assume for a minute we can cut 2 trillion in spending so we are talking about a spending increase of 4 trillion. This would mean roughly doubling current government revenues. If you wanted to do so with a flat tax, you'd see rates near the top rate now on all income. Are people ready for a world where you get $24,000/year from the government and pay something like a 40% tax on all your income? Compared to the current tax code you probably break even at roughly $75,000/year and for incomes above that you'd pay more in tax.
recursive 3y ago
I'm one of the people you're talking about. I tried it and it had the opposite effect. I tried to do it with the plain forms once about 15 years ago. Somehow I ended up reporting the same input twice or something? I'm still not sure what I did wrong, but I ended up getting taxed for income that didn't exist. I didn't know how to correct it. I wrote letters and called the IRS probably dozens of times. I spent more than 50 hours poring through documents trying to figure it out. I tried to find an accountant that could understand what was happening. Eventually, it went away. I'm not sure what I did differently or if the IRS just got tired of dealing with me and waived it. I was probably doing all of this incompetently, but I could not get a "foothold". I have somewhat of a tax phobia to this day. The problem had something to do with some independent contracting I had done that year. I just resolved not to do that anymore.
- dmoy 3y ago
  Shoot, I accidentally reported the same income twice even with turbotax once because I didn't understand what non-covered shares were. (And in my defense, the broker also didn't show cost basis on the 1099-B either, I was just supposed to know)
  - ghaff 3y ago
    I forget when the cost basis reporting requirements got firmed up but there were some point where I had options from a former employer that had gone through a couple rounds of acquisitions and when I eventually sold the shares I ended up throwing my hands up a plugged in some average cost basis that was somewhere in the ballpark and called it a day. It's all pretty automatic these days but it used to often be a real mess to try to do accurately.
    - dmoy 3y ago
      Yea cost basis reporting from the broker to you is better now. Cost basis reporting from the broker to the IRS is still blank for non-covered shares though, which leads to the other common case of "forgot a page of 1099, IRS thinks it's $0 cost basis, sends bill for $10k++, but actually you owe ~$0 if you send in the correct info".
xnorswap 3y ago
I appreciate what you're trying to say, but: This is a direct quote from 1040: > 14 Add lines 12 and 13 > 15 Subtract line 14 from line 11. Compared to a real system, that is insane. You have to deliberately enter redundant information onto a form that should be handled automatically by a computer. It feels like the only purpose is to catch you out in case you make a mistake. Furthermore, the system should be set up so most people never even need to file. You can quickly check in the UK if you need to file via https://www.gov.uk/check-if-you-need-tax-return/ https://www.gov.uk/check-if-you-need-tax-return/ ( You don't need even to login to do that one, you can try it out yourself even if you're not in the UK to get a sense for the self-assessment requirements ) Most employed people don't have to file. And even if you do need to file, you can do so online via another helpful form: https://www.gov.uk/log-in-file-self-assessment-tax-return https://www.gov.uk/log-in-file-self-assessment-tax-return Functional online forms which actually take into account your answers and don't ask you to get out a calculator. And keep in mind that the US tax system feels like it's set up to pretend you "owe" lots of tax, only for there to be a ton of reimbursements or allowances or refunds. Which is then more forms to fill in (Form 2555 in my case ), each with their own cryptic instructions on where to write numbers and what to add to what: > Subtract line 25 from line 24. Enter the result here and on line 27 on page 3. Literally getting you to write it in twice because there's a page break? Do you really think this is simple? > 32 Multiply $49.10 by the number of days on line 31. If 365 is entered on line 31, enter $17,920 here > 33 Subtract line 32 from line 30 > 34 Enter employer-provided amounts. See instructions > 35 Divide line 34 by line 27. Enter the result as a decimal (rounded to at least three places), but don’t enter more than “1.000” > 36 Housing exclusion. Multiply line 33 by line 35. Enter the result but don’t enter more than the amount on line 34. Also, complete Part VIII That's a direct quote of 5 lines in a row from form 2555. That's not a tax form that's a fucking arithmetic test. Oh, and that "See Instructions" means a completely different booklet of guidance, in case anyone thought it was on the form itself.
- pclmulqdq 3y ago
  You presumably own a calculator. Those questions are quite simple with one. There's also an online spreadsheet version so a computer can do all the math for you without paying a dime to intuit.

thfuran 3y ago

>and it will take at most an hour or so. And that's absolutely insane. That's tens of millions of man hours per year spent essentially on rote data entry of data that the IRS already has so that you can submit it to the IRS for them to check against their copy.

ghaff 3y ago
I would like to think that even if the IRS were to send me some numbers, I'd still spend an hour or so checking them against my own information.
- JohnFen 3y ago
  I know that I wouldn't, because I don't want to. I'd just pay the amount the IRS says I should pay and call it good. I'd probably be paying more tax than absolutely necessary, but I honestly wouldn't mind that at all -- especially because I'd be saving money over doing the taxes myself (in the sense of time == money) or paying someone else to do them for me.
  - pclmulqdq 3y ago
    I mean, if the IRS was wrong about your income and you got audited, you would probably still be on the hook for penalties and back taxes. You're still going to want to spend some time checking that tax form pretty thoroughly.
    - JohnFen 3y ago
      True, but the same is also true if a tax preparer makes a mistake. Also, the IRS almost always waives penalties (and often interest) unless they think it wasn't an honest mistake. I'm not bothered by this risk. If a mistake is made and I owe additional taxes, then I'll just pay what I owe. No biggie.
      - pclmulqdq 3y ago
        I mean, that is a hell of a life choice, but I guess if you assume that the government is always honest (see the Iraq war and many other things) and the IRS always interprets the documents they receive correctly (which they don't today - I have gotten letters from them which are blatantly wrong), that sounds good. I understand that an hour is valuable, but that hour you spend checking your tax documents may be the highest-leverage hour of work you do that year.
        JohnFen 3y ago
        > that is a hell of a life choice This implies that I'm taking some huge risk or would be absurdly overpaying my taxes or something. I don't think either of those things are true. In the larger picture, this isn't really that big of a deal. > I guess if you assume I assume none of those things. > that hour you spend checking your tax documents may be the highest-leverage hour of work you do that year. It would be more than an hour, but the time isn't even the biggest issue. The biggest issue is the stress, worry, and hassle. It's just a basic cost/benefit calculation here, no different than other cases where I accept a level of increased expense or some risk because it costs more than I'm willing to pay to mitigate it. I have bigger fish to fry than this. Micromanaging this would reduce my overall happiness by adding an additional thing to worry about. Everyone's cost/benefit calculation is different, of course, and if yours indicates that you'd be better off being more diligent about this stuff, that's entirely fair as well.
- thfuran 3y ago
  It shouldn't take nearly as long to verify if it's presented at all reasonably.

ghaff 3y ago

Frankly, this whole thread is evidence of that. There's been a meme since before Intuit existed that tax prep in the US is akin to performing brain surgery on yourself. I do have enough oddball schedules these days that having an accountant is almost certainly a good idea but, honestly, I piggybacked on my parents' accountant for many years when I probably didn't really have a good reason to. A lot of people have just convinced themselves that getting a Turbotax update or going to the H&R Block booth at Walmart is just one of those annual rituals you have to do if you're sensible.

hedora 3y ago

I used to do it with just the 1040 and a spreadsheet. The problem with that is that there are literally 100 crazy-assed questions that I have to answer in order to fill out all the supplementary worksheets, etc. For instance: I bought a used EV. Do I take the tax break? Is it a deduction or credit? Figuring that out will take at least 10 minutes after you find the right IRS bulletin. Also, we have a roboadvisor, which means we hit all the corner cases for investment income. Even with turbotax, it takes about 8 hours for our moderately complicated taxes. Just getting the basic stuff that any homeowner with a family has to do takes 2-3. On top of that, the first year I used turbotax, I found out I had been overpaying ~$200-500 the previous 4 years. Filing amended returns wasn’t worth it, but paying the intuit mafia would have saved me time and money in the long run. If I had my way, we would move to a UBI and a flat tax (on income and capital gains). That reduces the tax code to a two variable equation of a line. I’d take a scatterplot of the 30-90th percentile of the US’s effective tax rates, and fit the line to that data set with a linear regression. In addition to creating basic income, this would ensure that the ultra wealthy actually pay taxes.

pclmulqdq 3y ago
I would suggest that you are almost certainly in the top 5% on complexity of your tax situation between the roboadvisor, the house, and the EV, if not all of the other things that you are spending 8 hours on. You may be in the top 1% on number of pages in your federal tax return. Personally, I would love a flat tax, although I would probably pay more under that system. It will never happen, though.
TimPC 3y ago
I think UBI and flat tax are fundamentally incompatible. Reasonable levels of UBI require high taxes, and doing so with entirely flat taxes will be quite punitive on the middle class. I think the vast majority of the population think there is a lot of merit to graduated tax rates as well, charging 50% tax on all of someone's income above $10,000,000 isn't as punitive to any sort of living standard as charging 50% tax on someone's first $30k of income. If we want a UBI of $24,000/year ($2,000/month) for an adult population of 250 million we are talking 6 trillion dollars in additional government spending. Assume for a minute we can cut 2 trillion in spending so we are talking about a spending increase of 4 trillion. This would mean roughly doubling current government revenues. If you wanted to do so with a flat tax, you'd see rates near the top rate now on all income. Are people ready for a world where you get $24,000/year from the government and pay something like a 40% tax on all your income? Compared to the current tax code you probably break even at roughly $75,000/year and for incomes above that you'd pay more in tax.

recursive 3y ago

I'm one of the people you're talking about. I tried it and it had the opposite effect. I tried to do it with the plain forms once about 15 years ago. Somehow I ended up reporting the same input twice or something? I'm still not sure what I did wrong, but I ended up getting taxed for income that didn't exist. I didn't know how to correct it. I wrote letters and called the IRS probably dozens of times. I spent more than 50 hours poring through documents trying to figure it out. I tried to find an accountant that could understand what was happening. Eventually, it went away. I'm not sure what I did differently or if the IRS just got tired of dealing with me and waived it. I was probably doing all of this incompetently, but I could not get a "foothold". I have somewhat of a tax phobia to this day. The problem had something to do with some independent contracting I had done that year. I just resolved not to do that anymore.

dmoy 3y ago
Shoot, I accidentally reported the same income twice even with turbotax once because I didn't understand what non-covered shares were. (And in my defense, the broker also didn't show cost basis on the 1099-B either, I was just supposed to know)
- ghaff 3y ago
  I forget when the cost basis reporting requirements got firmed up but there were some point where I had options from a former employer that had gone through a couple rounds of acquisitions and when I eventually sold the shares I ended up throwing my hands up a plugged in some average cost basis that was somewhere in the ballpark and called it a day. It's all pretty automatic these days but it used to often be a real mess to try to do accurately.
  - dmoy 3y ago
    Yea cost basis reporting from the broker to you is better now. Cost basis reporting from the broker to the IRS is still blank for non-covered shares though, which leads to the other common case of "forgot a page of 1099, IRS thinks it's $0 cost basis, sends bill for $10k++, but actually you owe ~$0 if you send in the correct info".

xnorswap 3y ago

I appreciate what you're trying to say, but: This is a direct quote from 1040: > 14 Add lines 12 and 13 > 15 Subtract line 14 from line 11. Compared to a real system, that is insane. You have to deliberately enter redundant information onto a form that should be handled automatically by a computer. It feels like the only purpose is to catch you out in case you make a mistake. Furthermore, the system should be set up so most people never even need to file. You can quickly check in the UK if you need to file via https://www.gov.uk/check-if-you-need-tax-return/ https://www.gov.uk/check-if-you-need-tax-return/ ( You don't need even to login to do that one, you can try it out yourself even if you're not in the UK to get a sense for the self-assessment requirements ) Most employed people don't have to file. And even if you do need to file, you can do so online via another helpful form: https://www.gov.uk/log-in-file-self-assessment-tax-return https://www.gov.uk/log-in-file-self-assessment-tax-return Functional online forms which actually take into account your answers and don't ask you to get out a calculator. And keep in mind that the US tax system feels like it's set up to pretend you "owe" lots of tax, only for there to be a ton of reimbursements or allowances or refunds. Which is then more forms to fill in (Form 2555 in my case ), each with their own cryptic instructions on where to write numbers and what to add to what: > Subtract line 25 from line 24. Enter the result here and on line 27 on page 3. Literally getting you to write it in twice because there's a page break? Do you really think this is simple? > 32 Multiply $49.10 by the number of days on line 31. If 365 is entered on line 31, enter $17,920 here > 33 Subtract line 32 from line 30 > 34 Enter employer-provided amounts. See instructions > 35 Divide line 34 by line 27. Enter the result as a decimal (rounded to at least three places), but don’t enter more than “1.000” > 36 Housing exclusion. Multiply line 33 by line 35. Enter the result but don’t enter more than the amount on line 34. Also, complete Part VIII That's a direct quote of 5 lines in a row from form 2555. That's not a tax form that's a fucking arithmetic test. Oh, and that "See Instructions" means a completely different booklet of guidance, in case anyone thought it was on the form itself.

pclmulqdq 3y ago
You presumably own a calculator. Those questions are quite simple with one. There's also an online spreadsheet version so a computer can do all the math for you without paying a dime to intuit.