Americans spend hours and hours preparing their taxes. We shouldn’t have to.

[Montecfo]

It seems like most Americans spend (or could spend) minutes, not hours, doing their tax return.

And some sort of government tabulation would thus save them minutes, not hours.

People who do spend hours would probably not benefit much from such a system, or so it seems from here.

Now, a dramatic reform of the tax code could change things. But that seems very unlikely given the trend to use the tax code as a political carrot or stick.

Principles based reforms, such as a flat tax or consumption tax, seem very unlikely unless demanded by the electorate. New types of taxes usually augment, but never replace the old ones.

 

[MJ]

To me, the point is, no matter if it only takes you 30-60 minutes to file, we still should not have to do this when the IRS already has the information for many of us.

I wonder if the IRS does get all the required 1099's and W2's from smaller companies. I would think having people do their own taxes might file the gaps in missing yearend tax docs. Just a thought.

 

[Dreamer]

The IRS might not get all of the required 1099's and W2's from smaller companies. If the W2 was not reported, then the person would not agree with the amount that the IRS sent them for their taxes. It is the same scenario, when a person checks their social security earned wages each year and discovers that there is missing wages on their record.

People who want to use the IRS card showing taxes owed, would be able to use it. If you disagreed or you had other exclusions that applied to you, you would be free to file your taxes yourself or take them somewhere to have them done.

I would love to be able to use this system.

 

[RetMD21]

You are leaving out the part where you make a decision about which standard deduction to apply. You are using your personal knowledge of your family members to decide whether they are filing single or married, under or over 65, whether they have children and how old they are, etc. The IRS doesn't know or keep track of any of that. The most they can do is verify SS numbers are valid and not used on multiple returns. Other parts of the federal, state and county governments do know some of this info, but there are privacy gates that are supposed to prevent them from collating it all in one agency.

If we want the IRS to do everyone's taxes for them, then we either have to give them access to a whole lot more data and the infrastructure to manage that kind of data collection; or we have to stop giving tax breaks for getting married, having kids, owning a house, giving to charity, experiencing a disaster, having large medical expenses, etc.

Oh, I thought they could just add the same family
members as the previous year. With the higher standard deductibles few are benefiting from mortgage charitable or medical expense deductions.

 

[ownyourfuture]

I can't read the links due to paywalls. If the IRS prepared returns using known W2 and 1099 income and applied the standard deduction based on last year's tax situation it would save a lot of people from paying someone to do simple taxes.

I'll try to tread carefully here. If a persons taxes are simple, what would prevent them from purchasing the most basic tax software & doing them on their own ?
Heck, they might even qualify to do them online for free.

 

[Sunset]

One advantage for me doing my 91-year-old dad's taxes is that I can co-ordinate with his investment advisor the proper withholding from his IRA distributions so he either owes very little or gest very little back (or, with his state return, make sure zero is withheld because he never has a state tax liability). Saving him $300 in tax preparer fees he likes, too!

I do the same for some relatives, they are older and would pay hundreds for simple returns to be done, or struggle with all the paper forms from the library.
One mistake or late 1099 meant having to re-write all the forms with new numbers

 

[Badger]

You are leaving out the part where you make a decision about which standard deduction to apply. You are using your personal knowledge of your family members to decide whether they are filing single or married, under or over 65, whether they have children and how old they are, etc. The IRS doesn't know or keep track of any of that...

Isn't most or all of that information requested on the first half of the first page of the tax forms? What if those personal pieces of information are handled with a short verification form on line at the end of the tax year?

Cheers!

 

[deserat]

Read half the thread.

For me preparing for taxes is a year long affair as I have Sched C income and I do Roth conversions. Tracking the Cash Flow of my business takes time (I have an excel sheet). For the actual tax form prep, I use an excel sheet available each year on Boglehead and then transcribe over to the pdf forms. I still file on paper - I've been dinged several times with regard to my personal information and the federal government not protecting it through the OPM breach and others such that I do not trust the electronic filing. Yes, I know the paper can be an issue, however, with electronic the mistakes propagate much more quickly.

11 hours is probably a bit low some years and about right others.

As for other countries' practices and having the IRS just send me a bill, I already get that with being a US fed employee for my overseas move and storage; they are woefully off on their estimates and I end up overpaying for those privileges every year. So, trust factor is low with regard to their calcs. Also, I will ensure my interests are taken care of and am not interested in them being my agent for those interests.

Now, if they were willing to go to a simpler tax code or flat tax, then I'd be wiling to be a bit more trusting. I don't see that happening. Even with the supposed 'simplification' that came with the last tax, act, I noticed I was sending in more forms and this year, it was worse; I don't see that as simplification.

 

[TheWizard]

I'll try to tread carefully here. If a persons taxes are simple, what would prevent them from purchasing the most basic tax software & doing them on their own ?
Heck, they might even qualify to do them online for free.

Fear of the unknown is what prevents them; the idea that you can learn something new as an adult.

As was mentioned in a thread here recently, we must remember that half of the population out there is of below-average intelligence, so yeah.

Anyhow, if you're doing your income taxes yourself for the first time, I suppose it could take quite a few hours, depending on how you approach the learning process.
This would include reading Publication 17 all the way through.

But for many of us with simple returns, this year's taxes are very similar to last year's, just different numbers everywhere. And especially with tax software watching over you, it's definitely a doable thing for most folks...

 

[Alan]

One factor may be, to what extent do other developed nations use the tax code not just to collect revenue, but to influence social policy and provide incentives for various groups or industries favored by whichever administration is in place.

While people may complain about the time to do their taxes, the ability to use the tax code in the above manner - necessitating its complexity - seems quite popular.

In the UK, social policies are mostly done outside the tax system. For example there are no “dependents “, no spouse, children, elderly parents etc. For each child, up to 4 per parent, a monthly payment is made to the parent. It always used to be the mother who received the payment and I remember as a child going to the Post Office with my mother every week to cash in the “family allowance”. ( It was a book of vouchers cashable at banks and Post Offices). While we had minor children ourselves in the 80s the payments were monthly directly paid into our bank.

If looking after an elderly parent or disabled household member their is carer’s allowance. Charitable contributions are made to charities who then get 25% etc direct from the government.

Student loans, installation of energy efficient boilers, home EV charge points etc are all handled outside the tax system.

 

[cathy63]

Isn't most or all of that information requested on the first half of the first page of the tax forms? What if those personal pieces of information are handled with a short verification form on line at the end of the tax year?

Cheers!

Yes, most of that is at the top of the 1040 and there are ways it could be handled, e.g. by requiring a birth date for everyone on the return so the IRS can actually calculate the standard deductions and dependent credits.

You can't ask all Americans to go online to do a verification though. Having spent the past two years dealing with people who are trying to get stimulus payments and advance child tax credit payments, I can tell you there's a large population of mostly very elderly or very low income people for whom that's just not an option.

 

[Midpack]

You can't ask all Americans to go online to do a verification though. Having spent the past two years dealing with people who are trying to get stimulus payments and advance child tax credit payments, I can tell you there's a large population of mostly very elderly or very low income people for whom that's just not an option.

Some of my friends have very expensive smartphones/mobile plans, used for texts and phone calls only. When I try to show them other features/apps, they get angry.

 

[Badger]

As was mentioned in a thread here recently, we must remember that half of the population out there is of below-average intelligence, so yeah.

The longer I am alive the more I tend to disagree with this. I think you are being too generous.

Cheers!

 

[Closet_Gamer]

I don't know about 11 hours on average, but watching my wife do my college age daughter's supposedly simple taxes gives me a lot of empathy.

Four W-2s
One "untaxed income" form for $100 she earned working a covid clinic (that kicked her into turbotax hell)

Federal 1040
Two state returns
One municipality

Net: On about $4500 of income, they collectively owed her $6.

I bet she did spend six hours on it -- and my wife is bright and organized.

Loads of people are simply intimidated by this stuff.

When I was young, it took me a couple years to really understand income vs. capital gains and how to calculate them. Wash sales still make me bang my head on the table. On year I got myself a K-1...I sold that asset simply to avoid having a K-1 again.

The whole thing is pure insanity.

 

[GTFan]

I did not read every post in detail but somewhere I read that the two biggest lobbyists for keeping the current, highly confusing process in place are TurboTax and H&R Block. Apologies if this was mentioned earlier.

That's exactly right, and also the reason why it's very hard to file taxes for free. The industry pays big money to keep free filing as confusing as they can. These articles explain how Intuit and Block have stalled progress on IRS free filing for years.

https://www.propublica.org/article/...op-americans-from-filing-their-taxes-for-free
https://www.propublica.org/article/...oundbreaking-legal-battle-over-consumer-fraud

For anyone wondering, Pro Publica is a well-respected independent investigative outfit that has done stories with PBS Frontline, among others.

 

[GTFan]

Like I said... Intuit pays $141m to settle misleading 'free tax filing' claims.

https://www.cnbc.com/2022/05/04/turbotax-owner-intuit-to-pay-141-million-to-customers.html?

This settlement was a direct result of the ProPublica investigation.

 

[oldtimer]

Like I said... Intuit pays $141m to settle misleading 'free tax filing' claims.

https://www.cnbc.com/2022/05/04/turbotax-owner-intuit-to-pay-141-million-to-customers.html?

This settlement was a direct result of the ProPublica investigation.

Less than $3 per customer.

 

[Midpack]

Like I said... Intuit pays $141m to settle misleading 'free tax filing' claims.

https://www.cnbc.com/2022/05/04/turbotax-owner-intuit-to-pay-141-million-to-customers.html?

This settlement was a direct result of the ProPublica investigation.

Less than $3 per customer.

$141 million / 4.4 million customers = $32/customer.

Consumers are expected to receive about $30 for each year they paid for services, the announcement said. They will automatically receive notices and a check by mail.

 

[RetMD21]

The Propublica link was very interesting. For my own situation I don't mind paying but for many a simple federal efile or prefilled form would improve their quality of life.

 

[Gumby]

The local paper quotes our attorney general as saying that everyone affected will get a check for $29.64

 

[MichaelB]

It looks like everyone who qualified for free filing will be getting a full refund! That’s an excellent outcome.

 

[ERD50]

In the UK, social policies are mostly done outside the tax system. For example there are no “dependents “, no spouse, children, elderly parents etc. ...

Student loans, installation of energy efficient boilers, home EV charge points etc are all handled outside the tax system.

Hear, hear!

That's what bugs me about our US tax system - I have to go through screen after screen after screen of "did you do this?", "did you partake in that?", " did you live in an area that had this or that occur?", and the IL seems to be even worse. But you don't want to miss a legitimate credit either.

All this stuff, like a rebate for a high efficiency furnace, etc, should be outside the tax system. You bought the furnace, the salesperson can inform you of the credit, and you apply for it. Don't bother the other 97% that didn't buy a new furnace that year, many of whom did not buy a high efficiency one, so it doesn't apply anyhow. And all that complicates the tax program, a needless complication that doesn't apply to a large majority.

If you did buy a qualifying furnace, the form could always ask for some info from your 1040 if they want to scale it somehow. Though bottom line, I'm against all these subsidy/credits anyhow, but at least keep it simple if you are going to do them (the "you" being Congress).

-ERD50

 

[ERD50]

Some of my friends have very expensive smartphones/mobile plans, used for texts and phone calls only. When I try to show them other features/apps, they get angry.

FYI, that's not always a "technophobe" issue. I pretty much hate doing anything on a phone, I'm used to having a full sized keyboard, numeric keypad, function keys, 3-button mouse, dual monitors, a copy paste buffer, and eight 'virtual desktops' with dozens of windows open.

When I do something on a phone, I feel like I've got one hand tied behind my back, a boxing glove on the free hand, and looking through a peep hole to see the screen.

Of course, there are a few apps that are handy, and don't require much in the way of intricate user interaction, but in general, I really hate phone apps.

-ERD50

 

[Midpack]

FYI, that's not always a "technophobe" issue. I pretty much hate doing anything on a phone, I'm used to having a full sized keyboard, numeric keypad, function keys, 3-button mouse, dual monitors, a copy paste buffer, and eight 'virtual desktops' with dozens of windows open.

When I do something on a phone, I feel like I've got one hand tied behind my back, a boxing glove on the free hand, and looking through a peep hole to see the screen.

Of course, there are a few apps that are handy, and don't require much in the way of intricate user interaction, but in general, I really hate phone apps.

-ERD50

I am talking about actual friends I interact with weekly here, trust me they openly admit they don't like change, especially tech...

 

[Gumby]

I have mastered many technologies over the course of my life. Some of the them have been useful, but others seemed then and now to be nothing but solutions in search of a problem. There never has been, is not now, and likely never will be any reason for my refrigerator to communicate with my doorbell.