5 ms·

As a developer who's married to a CPA, here are my thoughts: 1. Taxes are a hard problem. Besides basic W2s, There are a lot of deductions to know about, and

As a developer who's married to a CPA, here are my thoughts: 1. Taxes are a hard problem. Besides basic W2s, There are a lot of deductions to know about, and it's hard to keep track of all of them. 2. Depreciation schedules. They vary from item to item, and there's a bit of a grey area on what you can use, and what you can't. What can have bonus depreciation? 3. Calculating cost basis is too damn hard for most of us. Not just stocks, but partnerships as well. 4. When can you take a distribution from a business? How many times is that money taxed? 5. Add another 50 use cases, one for each state. 6. How do the states interact for individuals with diverse activity? Easily 2^50 cases here, and my gut say more like 50! 7. Foreign activity. Good luck with that. The bottom line is there still is enough complexity that this needs to be done manually. Not to mention there are a lot of things that are legitimate judgement calls, and vary from accountant to accountant (or auditor to auditor when dealing with the IRS). So, that's why robot's aren't doing my taxes any time soon.

dmm 14y ago
About 60% of tax payers submit a 1040A or 1040ez return. This is a dead simple return. The IRS already has all of the information needed to process these returns. The IRS could trivially set up a website that has two pages: 1. Verify this information is correct. 2. Where should we mail the check. The _only_ reason they don't is that there is a HUGE industry that exists solely to fill out these trivial forms for intimidated people. HR block, et al will never allow the tax system to be simple.
- eli 14y ago
  Normally I dismiss statements like "the lobby for X is the reason why things suck," but in this case I think you're at least partly right. H&R Block has literally spent millions lobbying against tax reform bills.
  - sehugg 14y ago
    Not just H&R Block: http://www.opensecrets.org/lobby/clientsum.php?id=D000026667 http://www.opensecrets.org/lobby/clientsum.php?id=D000026667
- Retric 14y ago
  There is already software out there to handle your federal income taxes for free. However, to use Free File Tax Software. This program is available if your AGI is $57,000 or less: http://apps.irs.gov/app/freeFile/jsp/index.jsp?ck http://apps.irs.gov/app/freeFile/jsp/index.jsp?ck http://www.irs.gov/efile/article/0,,id=118986,00.html http://www.irs.gov/efile/article/0,,id=118986,00.html PS: Anyone can still use free forms: http://www.irs.gov/efile/article/0,,id=237156,00.html http://www.irs.gov/efile/article/0,,id=237156,00.html
  - zyphlar 14y ago
    Why a $57,000 limit?
    - mynegation 14y ago
      Supposedly if you are over that limit you are rich enough to pay for a commercial software. Apparently government does not want to take business completely from the likes of Intuit.
    - dmm 14y ago
      That's the limit the Free File Alliance has negotiated. http://freefilealliance.org/ http://freefilealliance.org/
    - joshuaheard 14y ago
      Shhh. I have over the limit and have used the service for several years. Surprisingly, their automated error checking doesn't check for this.
  - jlarocco 14y ago
    Which is stupid, IMO. There's no reason not to have the e-file stuff directly on the irs.gov website. Instead, it's farmed out to 3rd party sites who try to trick people into buying add-on services. It's ridiculous, but I'm sure they lobby hard to keep it that way, so it's probably not changing anytime soon.
  - junktest 14y ago
    Again, one more instance of the unhealthy trend in giving for-profit, 3rd-party companies your sensitive personal info, that the US Govt should be handling and be responsible for directly in the first place, making identity-theft and such nefarious activities easier.
- sks 14y ago
  CA already does this with the ready return. All the information is already filled in with an option to change some information if something is missing.
- InclinedPlane 14y ago
  The tax system is not convoluted and complex due to the influence of the tax preparation industry, they have very little influence on the matter. Instead, it's the way it is due to many other enormous industries and interests (farms, welfare, support for families and home owners, investors, etc, etc, etc.) I can guarantee you that the reason there's a special section for "fishing boat proceeds" on your W2 is not because H&R Block thought it would be a hoot but because of complex politics around the fishing industry.
  - deleted 14y ago
    [deleted]
    - InclinedPlane 14y ago
      1. Why should there be one for all income categories? Some taxes are just plain fundamentally more complex than others. As it is, you can e-file for free through the federal government (I did so 2 years ago, it was no harder than filing out the form). 2. Are you seriously posing the question of why a ponderous government bureaucracy hasn't streamlined a process and made it user friendly? I'll just leave that one be.
  - jellicle 14y ago
    >The tax system is not convoluted and complex due to the influence of the tax preparation industry, This is true. > they have very little influence on the matter. This is not true. The tax prep industry has definitely had a major say in sinking several IRS efforts to make tax filing easier for individuals.
- kalleboo 14y ago
  I'm pretty sure most other countries do this. In Sweden when you get your tax papers, you can SMS in a printed code to approve the pre-printed numbers, and your taxes are done.
- smackfu 14y ago
  "The IRS already has all of the information needed to process these returns" Almost. They don't have filing status (married/single/etc.) and number of dependents. Unfortunately, those affect your tax rate, so the tax return can't be calculated without it.
  - dripton 14y ago
    If you're a W2 employee, they already have that information. It's on the W4 form that you fill out when you start a job, so that they can deduct the right amount from each paycheck.
    - zeroonetwothree 14y ago
      Actually the data you put on the W4 doesn't have to have anything to do with your actual status. Moreover, your status may have changed since you last updated your W4.
      - smackfu 14y ago
        Yeah, those people who put down 9 exemptions on their W4 would not be pleased.
        ars 14y ago
        Just in case you are being sarcastic, it is completely legitimate to put down a large number of exemptions if you know your tax liability will be very low for other reasons, and you want your employer to withhold less money. In fact you should tune the process - if last year you had a large refund, then this year add more exemptions till your refund is as small as you can make it. (Technically you can go over if you want, and be required to pay, most most people don't like that.) The easiest way to calculate it is do last years return with varying numbers of exemptions and compare the tax liability number (not the final number which includes payments). Use the real return as a baseline, then keep adding exemptions till the increase in the liability matches your refund, then use that number on the W-9. Perhaps that number minus one.
- matwood 14y ago
  Not sure about your reasoning why, but I agree with potential fix. Why can't the IRS send me a form that says this is what we have, sign if you agree? For most people this would work. For others it would be a starting point for deductions additional income, etc... What floored me this year is that after I submitted my taxes the state sent me a letter asking me for my W2 to verify the numbers. My confusion was, why doesn't the state already have my W2?!
- hartez 14y ago
  I don't know that it's the _only_ reason. I'm guessing another big part of it is that government agency software projects routinely run way past due and over budget, and often end up going nowhere. e.g., http://mobile.businessweek.com/news/2012-02-24/nextgen-faa-contracts-are-4-2-billion-over-budget-gao-says.html http://mobile.businessweek.com/news/2012-02-24/nextgen-faa-c... or http://www.usatoday.com/tech/products/services/2010-10-21-fbi21_ST_N.htm http://www.usatoday.com/tech/products/services/2010-10-21-fb... "The IRS could trivially set up a website" - no, you or I could trivially set up a website. The IRS can't trivially do anything.
- andrewla 14y ago
  I can't speak for why this hasn't happened yet. This idea, though, was a small thing that was very appealing about Obama back in 2008: > Simplify Tax Filings for Middle Class Americans: Obama will dramatically simplify tax filings so that millions of Americans will be able to do their taxes in less than five minutes. Obama will ensure that the IRS uses the information it already gets from banks and employers to give taxpayers the option of pre-filled tax forms to verify, sign and return. Experts estimate that the Obama proposal will save Americans up to 200 million total hours of work and aggravation and up to $2 billion in tax preparer fees. From http://web.archive.org/web/20080716203213/http://www.barackobama.com/pdf/ObamaBlueprintForChange.pdf http://web.archive.org/web/20080716203213/http://www.baracko... (I can't seem to find a more recent copy of this).
- sp332 14y ago
  I don't see how that claim could be true. The IRS has been pushing for simpler taxes for decades, and if they don't have the clout to make it happen H&R Block doesn't either. Taxes are complicated by much larger forces.
eli 14y ago
OK, but it seems like robots could at least make this a lot easier. Why can't the IRS send me forms with information pre-filled in based on the best of its knowledge? Doesn't CA do something like that with state taxes?
deleted 14y ago
[deleted]
nowarninglabel 14y ago
Except, that in my case, and a large minority of others (at least measured in the millions) all we are doing is filing a 1040 with the info from our W2s and taking the standard deduction. I've also had to fill out a schedule D for stocks, but as of this year that info is also reported to the IRS, so there's nothing I know that they don't know.
roguecoder 14y ago
My taxes aren't anything like that complicated. According to the Tax Policy Center over 70% of tax payers took the standard deduction in 2010. Surely solving for that case first and letting those people who will always pay accountants to minimize their liabilities continue to file on paper would increase general welfare. It's the 80/20 rule in action.
dsr_ 14y ago
That's why robots aren't doing your taxes. How about for the vast majority of Americans who have one job, no business ownership, no foreign income, no equities trades, a very simple IRA or 401(k), zero or one spouse, zero to n dependents, and possibly a mortgage? 1040EZ should be replaced with 1040AUTO: at the end of February you get: what we've already had submitted by your employer and bank(s), here's the precalculation: sign here and check off the agreement box, or check the complication box and file the appropriate form in April. Don't let the best be the enemy of the good enough for most people.
- lloeki 14y ago
  In France I basically go to impots.gouv.fr, click, click (identify with govt rooted personal SSL cert), double-check pre-filled revenue values, add whatever optional specificity I need, click (sign with SSL cert), done. It takes me ten minutes, tops, and ack goes straight in my email inbox. Tax payment could not be simpler: 1. auth 2. select tax to pay in list 3. click pay It's honestly awesome (although it requires a Java plugin for digital signing) and works on all reasonable OSes and browsers.
  - vilhelm_s 14y ago
    It can be slightly simpler: in the UK the common case is that you don't need to do anything at all, and the taxes are automatically deducted by your employer. (There are circumstances where you need to send a tax return, but they are the minority: http://www.hmrc.gov.uk/sa/need-tax-return.htm http://www.hmrc.gov.uk/sa/need-tax-return.htm).
  - paulhauggis 14y ago
    Too simple means there probably isn't much flexibility (IE: you are giving a ton of money to the government with little to no possibility of deductions). I don't think I want this.
    - khafra 14y ago
      What's flexibility good for? The government needs a certain amount of tax revenue to run; either they don't get that revenue, or the average tax rate is at a certain level, after all the "flexibility" is taken into account. What's more, the amount of tax revenue the government needs is lower without the deadweight loss of a good portion of the IRS's 106,000 employees, and the economy doesn't suffer the churn of seasonally employed accountants.
zyphlar 14y ago
1. What deductions? I fill out a ton of them every year and they're never more than my standard deduction. Maybe things change as I get older, but in the meantime it seems like a safe default. "Do you want to try and get your taxes lower than $X by filling in a bunch of info? (Y/N)" 2. What am I going to deprecate, my Civic? 3. Despite being in a healthy tax bracket I don't know what this is. 4. See #3 5. Snoozefest 6. Diverse activity? 7. Yeah I think most of your objections apply to the minority of people who actually hire a CPA to do their taxes. The bottom line is, for the vast majority of people (even people with interesting W2/1099 incomes like me) you could do your taxes on a napkin if you enjoyed a bit of paperwork/math pain. Again: the IRS already has basically all of this info. What gives?
- ef4 14y ago
  (3) Cost basis matters whenever you sell an asset, whether it's a house or a stock or whatever. You can get sucked into partnership cost basis calculations simply by buying certain mutual funds that are structured that way. (6) Diverse activity means income in more than one jurisdiction. People who travel a lot for work can end up filing with dozens of states. A real hoot.
gcb 14y ago
all of that is already coded into rules.
kalleboo 14y ago
> The bottom line is there still is enough complexity that this needs to be done manually I would have said "The bottom line is there is still enough complexity that this needs to be done by machine". We have machines simulating weather patterns. Is tax code that much more complicated?
- Symmetry 14y ago
  Weather patterns are just a matter of applying some relatively simple rules a huge number of times. Taxes, by contrast, require clever parsing of the meaning of words and the intent behind them. Figuring out exactly what counts as "education" for instance.
- gvb 14y ago
  But does the weatherman go to jail if the forecast is wrong? There is a steady stream of people writing "Google's automatic system screwed me and I cannot get it fixed" blog posts. If Google's automated system screws people, just imagine how effective the government's system will be.
yock 14y ago
So, what you're essentially saying is that robots aren't doing out taxes because the rules are poorly defined and open to wide subjective interpretation? That sounds to me like the rules are broken, not the robots.
zeroonetwothree 14y ago
If you don't itemize or have a business, then the IRS has all your income available to it. In particular, brokerages must now report cost basis on all stock/MF sales.

dmm 14y ago

About 60% of tax payers submit a 1040A or 1040ez return. This is a dead simple return. The IRS already has all of the information needed to process these returns. The IRS could trivially set up a website that has two pages: 1. Verify this information is correct. 2. Where should we mail the check. The _only_ reason they don't is that there is a HUGE industry that exists solely to fill out these trivial forms for intimidated people. HR block, et al will never allow the tax system to be simple.

eli 14y ago
Normally I dismiss statements like "the lobby for X is the reason why things suck," but in this case I think you're at least partly right. H&R Block has literally spent millions lobbying against tax reform bills.
- sehugg 14y ago
  Not just H&R Block: http://www.opensecrets.org/lobby/clientsum.php?id=D000026667 http://www.opensecrets.org/lobby/clientsum.php?id=D000026667
Retric 14y ago
There is already software out there to handle your federal income taxes for free. However, to use Free File Tax Software. This program is available if your AGI is $57,000 or less: http://apps.irs.gov/app/freeFile/jsp/index.jsp?ck http://apps.irs.gov/app/freeFile/jsp/index.jsp?ck http://www.irs.gov/efile/article/0,,id=118986,00.html http://www.irs.gov/efile/article/0,,id=118986,00.html PS: Anyone can still use free forms: http://www.irs.gov/efile/article/0,,id=237156,00.html http://www.irs.gov/efile/article/0,,id=237156,00.html
- zyphlar 14y ago
  Why a $57,000 limit?
  - mynegation 14y ago
    Supposedly if you are over that limit you are rich enough to pay for a commercial software. Apparently government does not want to take business completely from the likes of Intuit.
  - dmm 14y ago
    That's the limit the Free File Alliance has negotiated. http://freefilealliance.org/ http://freefilealliance.org/
  - joshuaheard 14y ago
    Shhh. I have over the limit and have used the service for several years. Surprisingly, their automated error checking doesn't check for this.
- jlarocco 14y ago
  Which is stupid, IMO. There's no reason not to have the e-file stuff directly on the irs.gov website. Instead, it's farmed out to 3rd party sites who try to trick people into buying add-on services. It's ridiculous, but I'm sure they lobby hard to keep it that way, so it's probably not changing anytime soon.
- junktest 14y ago
  Again, one more instance of the unhealthy trend in giving for-profit, 3rd-party companies your sensitive personal info, that the US Govt should be handling and be responsible for directly in the first place, making identity-theft and such nefarious activities easier.
sks 14y ago
CA already does this with the ready return. All the information is already filled in with an option to change some information if something is missing.
InclinedPlane 14y ago
The tax system is not convoluted and complex due to the influence of the tax preparation industry, they have very little influence on the matter. Instead, it's the way it is due to many other enormous industries and interests (farms, welfare, support for families and home owners, investors, etc, etc, etc.) I can guarantee you that the reason there's a special section for "fishing boat proceeds" on your W2 is not because H&R Block thought it would be a hoot but because of complex politics around the fishing industry.
- deleted 14y ago
  [deleted]
  - InclinedPlane 14y ago
    1. Why should there be one for all income categories? Some taxes are just plain fundamentally more complex than others. As it is, you can e-file for free through the federal government (I did so 2 years ago, it was no harder than filing out the form). 2. Are you seriously posing the question of why a ponderous government bureaucracy hasn't streamlined a process and made it user friendly? I'll just leave that one be.
- jellicle 14y ago
  >The tax system is not convoluted and complex due to the influence of the tax preparation industry, This is true. > they have very little influence on the matter. This is not true. The tax prep industry has definitely had a major say in sinking several IRS efforts to make tax filing easier for individuals.
kalleboo 14y ago
I'm pretty sure most other countries do this. In Sweden when you get your tax papers, you can SMS in a printed code to approve the pre-printed numbers, and your taxes are done.
smackfu 14y ago
"The IRS already has all of the information needed to process these returns" Almost. They don't have filing status (married/single/etc.) and number of dependents. Unfortunately, those affect your tax rate, so the tax return can't be calculated without it.
- dripton 14y ago
  If you're a W2 employee, they already have that information. It's on the W4 form that you fill out when you start a job, so that they can deduct the right amount from each paycheck.
  - zeroonetwothree 14y ago
    Actually the data you put on the W4 doesn't have to have anything to do with your actual status. Moreover, your status may have changed since you last updated your W4.
    - smackfu 14y ago
      Yeah, those people who put down 9 exemptions on their W4 would not be pleased.
      - ars 14y ago
        Just in case you are being sarcastic, it is completely legitimate to put down a large number of exemptions if you know your tax liability will be very low for other reasons, and you want your employer to withhold less money. In fact you should tune the process - if last year you had a large refund, then this year add more exemptions till your refund is as small as you can make it. (Technically you can go over if you want, and be required to pay, most most people don't like that.) The easiest way to calculate it is do last years return with varying numbers of exemptions and compare the tax liability number (not the final number which includes payments). Use the real return as a baseline, then keep adding exemptions till the increase in the liability matches your refund, then use that number on the W-9. Perhaps that number minus one.
matwood 14y ago
Not sure about your reasoning why, but I agree with potential fix. Why can't the IRS send me a form that says this is what we have, sign if you agree? For most people this would work. For others it would be a starting point for deductions additional income, etc... What floored me this year is that after I submitted my taxes the state sent me a letter asking me for my W2 to verify the numbers. My confusion was, why doesn't the state already have my W2?!
hartez 14y ago
I don't know that it's the _only_ reason. I'm guessing another big part of it is that government agency software projects routinely run way past due and over budget, and often end up going nowhere. e.g., http://mobile.businessweek.com/news/2012-02-24/nextgen-faa-contracts-are-4-2-billion-over-budget-gao-says.html http://mobile.businessweek.com/news/2012-02-24/nextgen-faa-c... or http://www.usatoday.com/tech/products/services/2010-10-21-fbi21_ST_N.htm http://www.usatoday.com/tech/products/services/2010-10-21-fb... "The IRS could trivially set up a website" - no, you or I could trivially set up a website. The IRS can't trivially do anything.
andrewla 14y ago
I can't speak for why this hasn't happened yet. This idea, though, was a small thing that was very appealing about Obama back in 2008: > Simplify Tax Filings for Middle Class Americans: Obama will dramatically simplify tax filings so that millions of Americans will be able to do their taxes in less than five minutes. Obama will ensure that the IRS uses the information it already gets from banks and employers to give taxpayers the option of pre-filled tax forms to verify, sign and return. Experts estimate that the Obama proposal will save Americans up to 200 million total hours of work and aggravation and up to $2 billion in tax preparer fees. From http://web.archive.org/web/20080716203213/http://www.barackobama.com/pdf/ObamaBlueprintForChange.pdf http://web.archive.org/web/20080716203213/http://www.baracko... (I can't seem to find a more recent copy of this).
sp332 14y ago
I don't see how that claim could be true. The IRS has been pushing for simpler taxes for decades, and if they don't have the clout to make it happen H&R Block doesn't either. Taxes are complicated by much larger forces.

eli 14y ago

OK, but it seems like robots could at least make this a lot easier. Why can't the IRS send me forms with information pre-filled in based on the best of its knowledge? Doesn't CA do something like that with state taxes?

deleted 14y ago

[deleted]

nowarninglabel 14y ago

Except, that in my case, and a large minority of others (at least measured in the millions) all we are doing is filing a 1040 with the info from our W2s and taking the standard deduction. I've also had to fill out a schedule D for stocks, but as of this year that info is also reported to the IRS, so there's nothing I know that they don't know.

roguecoder 14y ago

My taxes aren't anything like that complicated. According to the Tax Policy Center over 70% of tax payers took the standard deduction in 2010. Surely solving for that case first and letting those people who will always pay accountants to minimize their liabilities continue to file on paper would increase general welfare. It's the 80/20 rule in action.

dsr_ 14y ago

That's why robots aren't doing your taxes. How about for the vast majority of Americans who have one job, no business ownership, no foreign income, no equities trades, a very simple IRA or 401(k), zero or one spouse, zero to n dependents, and possibly a mortgage? 1040EZ should be replaced with 1040AUTO: at the end of February you get: what we've already had submitted by your employer and bank(s), here's the precalculation: sign here and check off the agreement box, or check the complication box and file the appropriate form in April. Don't let the best be the enemy of the good enough for most people.

lloeki 14y ago
In France I basically go to impots.gouv.fr, click, click (identify with govt rooted personal SSL cert), double-check pre-filled revenue values, add whatever optional specificity I need, click (sign with SSL cert), done. It takes me ten minutes, tops, and ack goes straight in my email inbox. Tax payment could not be simpler: 1. auth 2. select tax to pay in list 3. click pay It's honestly awesome (although it requires a Java plugin for digital signing) and works on all reasonable OSes and browsers.
- vilhelm_s 14y ago
  It can be slightly simpler: in the UK the common case is that you don't need to do anything at all, and the taxes are automatically deducted by your employer. (There are circumstances where you need to send a tax return, but they are the minority: http://www.hmrc.gov.uk/sa/need-tax-return.htm http://www.hmrc.gov.uk/sa/need-tax-return.htm).
- paulhauggis 14y ago
  Too simple means there probably isn't much flexibility (IE: you are giving a ton of money to the government with little to no possibility of deductions). I don't think I want this.
  - khafra 14y ago
    What's flexibility good for? The government needs a certain amount of tax revenue to run; either they don't get that revenue, or the average tax rate is at a certain level, after all the "flexibility" is taken into account. What's more, the amount of tax revenue the government needs is lower without the deadweight loss of a good portion of the IRS's 106,000 employees, and the economy doesn't suffer the churn of seasonally employed accountants.

zyphlar 14y ago

1. What deductions? I fill out a ton of them every year and they're never more than my standard deduction. Maybe things change as I get older, but in the meantime it seems like a safe default. "Do you want to try and get your taxes lower than $X by filling in a bunch of info? (Y/N)" 2. What am I going to deprecate, my Civic? 3. Despite being in a healthy tax bracket I don't know what this is. 4. See #3 5. Snoozefest 6. Diverse activity? 7. Yeah I think most of your objections apply to the minority of people who actually hire a CPA to do their taxes. The bottom line is, for the vast majority of people (even people with interesting W2/1099 incomes like me) you could do your taxes on a napkin if you enjoyed a bit of paperwork/math pain. Again: the IRS already has basically all of this info. What gives?

ef4 14y ago
(3) Cost basis matters whenever you sell an asset, whether it's a house or a stock or whatever. You can get sucked into partnership cost basis calculations simply by buying certain mutual funds that are structured that way. (6) Diverse activity means income in more than one jurisdiction. People who travel a lot for work can end up filing with dozens of states. A real hoot.

gcb 14y ago

all of that is already coded into rules.

kalleboo 14y ago

> The bottom line is there still is enough complexity that this needs to be done manually I would have said "The bottom line is there is still enough complexity that this needs to be done by machine". We have machines simulating weather patterns. Is tax code that much more complicated?

Symmetry 14y ago
Weather patterns are just a matter of applying some relatively simple rules a huge number of times. Taxes, by contrast, require clever parsing of the meaning of words and the intent behind them. Figuring out exactly what counts as "education" for instance.
gvb 14y ago
But does the weatherman go to jail if the forecast is wrong? There is a steady stream of people writing "Google's automatic system screwed me and I cannot get it fixed" blog posts. If Google's automated system screws people, just imagine how effective the government's system will be.

yock 14y ago

So, what you're essentially saying is that robots aren't doing out taxes because the rules are poorly defined and open to wide subjective interpretation? That sounds to me like the rules are broken, not the robots.

zeroonetwothree 14y ago

If you don't itemize or have a business, then the IRS has all your income available to it. In particular, brokerages must now report cost basis on all stock/MF sales.