IRS Moves Toward Free E-Filing (washingtonpost.com) 152
An anonymous reader quotes a report from the Washington Post: The Internal Revenue Service will spend $15 million studying a free, government-backed tax filing system under a provision in the sweeping climate and health-care law Congress passed this summer. It's a landmark step toward overhauling the way most Americans file their taxes and ending years of domination of tax prep by private corporations. Democrats have long lamented that millions of American pay for the privilege of filing taxes, and that corporate tax services take money from the neediest households. Hardly anyone uses the free e-filing options that industry supports because of restrictions on which returns qualify.
But the IRS has lacked the funding -- or the clout to outmaneuver private lobbyists -- to seriously consider its own e-filing platform, current and former officials say, forcing taxpayers instead to deal with a consortium of private providers and setting the agency back decades in technology and customer service. "The IRS is completely beholden to the software companies at this point because it just doesn't have anything to replace them," said Nina Olson, who served as the national taxpayer advocate, the IRS's internal consumer rights watchdog, from 2001 to 2019.
The commercial tax prep industry is gargantuan, worth $11.9 billion in 2022, according to market research firm IBIS World; 9 in 10 individual tax returns were filed digitally in 2021, the IRS reported. The largest players, Intuit TurboTax and H&R Block, offer narrowly tailored free e-filing options, and charge $59 and $55, respectively, for their lowest-paid tiers, plus variable filing fees and costs for state tax returns. Tax experts say a government-backed system could give more Americans access to free and trustworthy services, while increasing IRS efficiency by encouraging more taxpayers to file easy-to-process digital returns rather than cumbersome paper ones. But that would upset an ecosystem that by many accounts has served taxpayers and the government well for decades. The U.S.'s voluntary tax compliance rate -- the proportion of filers who pay federal taxes accurately each year -- is 83.6 percent by the most recent measurements, among the highest of developed economies.
But the IRS has lacked the funding -- or the clout to outmaneuver private lobbyists -- to seriously consider its own e-filing platform, current and former officials say, forcing taxpayers instead to deal with a consortium of private providers and setting the agency back decades in technology and customer service. "The IRS is completely beholden to the software companies at this point because it just doesn't have anything to replace them," said Nina Olson, who served as the national taxpayer advocate, the IRS's internal consumer rights watchdog, from 2001 to 2019.
The commercial tax prep industry is gargantuan, worth $11.9 billion in 2022, according to market research firm IBIS World; 9 in 10 individual tax returns were filed digitally in 2021, the IRS reported. The largest players, Intuit TurboTax and H&R Block, offer narrowly tailored free e-filing options, and charge $59 and $55, respectively, for their lowest-paid tiers, plus variable filing fees and costs for state tax returns. Tax experts say a government-backed system could give more Americans access to free and trustworthy services, while increasing IRS efficiency by encouraging more taxpayers to file easy-to-process digital returns rather than cumbersome paper ones. But that would upset an ecosystem that by many accounts has served taxpayers and the government well for decades. The U.S.'s voluntary tax compliance rate -- the proportion of filers who pay federal taxes accurately each year -- is 83.6 percent by the most recent measurements, among the highest of developed economies.
I don't want to file (Score:5, Insightful)
Re:I don't want to file (Score:5, Funny)
this is an message from the IRS about your bill
You are late and if you don't pay now with western union quick collect service we will place an warrant for your arrest with in the next 30 min.
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Re:I don't want to file (Score:5, Informative)
this is an message from the IRS about your bill You are late and if you don't pay now with western union quick collect service we will place an warrant for your arrest with in the next 30 min.
I can see this being a problem. A lot of people already have a hard time telling the difference between IRS scams and reality. If the IRS just sent you a bill you'd see a lot more of it.
Noting that the IRS does NOT (initially) call, text or email people. They send actual mail, through the USPS, on IRS letterhead with contact information you can independently look up and verify on IRS.gov.
- Here’s how the IRS contacts taxpayers [irs.gov]
- Understanding Your IRS Notice or Letter [irs.gov]
- Tax Scams/Consumer Alerts [irs.gov]
From the first link above:
Taxpayers should remember that payment will never be requested to a source other than the U.S. Treasury.
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this is an message from the IRS about your bill
You are late and if you don't pay now with western union quick collect service we will place an warrant for your arrest with in the next 30 min.
It's an obvious scam - why to even mention this when discussing IRS, not being open about the fraudulent nature of this?
Do you want all of us here to believe that you fell for this?
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There are people who fall for it though. $40 billion dollars are lost every year to phone scammers. I don't get why it is so hard to stop them, a large amount of that $40 billion must be going to "law enforcement." I have gotten a lot of these calls, and the recording is slightly different each time -- which probably means there are different scammers. It's probably my second favorite scam call .. right up there with the "Congratulations on your purchase of a brand new Macbook Pro, please verify your credit
Re:I don't want to file (Score:4, Informative)
Jennifer's Penis demanded:
Are you high or just stupid?
He's quoting an actual text message that I have also personally received. Twice ...
Re: I don't want to file (Score:2)
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Re:I don't want to file (Score:5, Insightful)
Re:I don't want to file (Score:5, Informative)
Yup, simpler tax codes are whats needed.
In the UK, a typical every day person will see the following taxation:
- sales tax, applied by retailers or service providers, required to be included in the advertised price, withheld by retailers and service providers who then pays to HMRC
- income tax, employer deals with HMRC to determine withholding requirement, withholds in each pay packet and pays to HMRC
- national insurance, same as income tax
Thats basically it - a typical every day person in the UK won't deal with any paperwork on the above, they will get a statement from their employer once a year detailing what tax they did pay but dont have to act on it.
Theres no deductions, no dependents to claim for, you don't get to claim back losses etc. If you buy a house, you have to pay duty on it, but if you sell your house then theres no tax to pay (so long as its your primary residence) and no loss to claim back.
Any tax required to be paid from savings or pension funds or retirement funds etc are withheld by the financial institution.
For benefits, thats dealt with either by alterations to your tax withholding requirement, so again the employer handles this, or its dealt with via credits to your bank account from a government department.
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What about investments? That's the hard part of taxes. Maybe in UK people don't invest, or people with a salary don't invest? Even with a good pension plan it's still a good idea to squirrel away the savings in something with a return to it.
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Most people in the UK invest in one of two ways - pension plans, or savings accounts.
Both are taxed at source - savings accounts have some interest withheld by the financial institution, and pension plans are taxed on payout later on down the road, again by the financial institution withholding whats due.
For the relatively small minority who invest via land, shares etc, you do need to do a self assessment for your tax, but thats usually a 10-15 minute task entirely online using government websites, and then
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What about investments? That's the hard part of taxes. Maybe in UK people don't invest, or people with a salary don't invest? Even with a good pension plan it's still a good idea to squirrel away the savings in something with a return to it.
How many people in the US walk over to a stock exchange and buy shares with cash? Just like any other financial institution, your investment firm can calculate and report what you owe.
Re: I don't want to file (Score:3)
I concur, as an ex pat living in the U.K., you should see the look on people here when I try to describe the tax system in the US, I still have to file every year even though my income is totally U.K. based, finding a free e-tax program every year is a nightmare, the companies keep changing what they support and don't fucking tell you until you're at the point of doing foreign income. It's BS. We shouldn't have to pay to file our taxes, but to do it on paper would be ridiculous.
Let's not forget the best par
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No deductions in the UK at all?
It's just here in Finland a lots of folks get some basic deductions from commuting (if above a certain threshold - just going from one end of Helsinki metro area to the other is enough).
In same vein, you can also deduct any expenses that have not been reimbursed by your employer - for example, for telecommuting (that lots of folks did due to Covid) you can deduct part of your Internet bill. Or if you get anything work-related on your own dime (I've deducted my IEEE membership
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If you are PAYE (which is what I am describing) then there are some things you can apply for tax relief for, but you apply directly to the tax office for them - the tax office then modifies your tax code and tells your employer your new tax code and expected withholding, so you get less tax taken out of your pay packet.
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So basically it is easy because instead of you the employer's accounting department deals with it. It's the same here. Unless you are self-employed. Then it is back to square one.
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Even for the employers accounting department, its easy - they give your NI number to the tax office, the tax office responds with “tax paid already this year of X, tax code of Y, expected withholding of Z for the rest of the year” and all the employers accounting team does is deduct that from your gross pay.
NI is similar, but thats just a straight percentage deduction.
Nothing onerous at all for a payroll team.
The UK system is designed to be easy for everyone involved.
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they won't know, for instance, if your generator sitting outside got stolen in the past year and you installed solar panels.
The police report and building permit are in the government records. If those were taxable events it wouldn't be shocking to see them brought up in an audit. You are probably right that many details about our finances are off the record, but maybe fewer than we think...
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Why not simplify it to a point where audits are basically unheard of? So things like "I bought a generator" or "I installed solar panels" or "my car was stolen" are not tax-related events for a normal person. See my other comment about how its handled in the UK.
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From what I've heard other nations with similar odd tax scenarios start off with a pre-filled tax form with all the data they *do* have, then the filer is able to add all that weird stuff that is infeasible for the government to have pre-filled.
The vast vast majority of people however have all taxes, credits, and deductions that they will be able to claim on file (W2s, 1099s, mortgage, how many and what age of dependents). For a large amount of the rest, they only have a small handful of additional data to
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True. Any mistake I make the IRS will notice if they do an audit, and likely most are noticed automatically by software without an audit. The things they don't know about are indeed, charities, foreign investments and/or foreign taxes paid, etc. Home improvements are covered under real estate tax which is local to the county or state, and they send people around every few years to look over the fence, but the real tax event is when the house is sold.
The snag is, that in exchange for keeping upper tier tax
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FYI on home improvement, I was thinking about energy efficiency improvements, which qualify for tax credits, hence a home improvement can have income tax implications that may not be well tracked by the government.
Indeed, the tax prep industry influence is insane. Both in spending and the audacity to claim government streamlining their own tax logistics is interfering with private industry. You could even have the loophole bullshit but still have easier tax prep, the wealthy would just be adding on. As I s
Re:I don't want to file (Score:4, Insightful)
To get to the nirvana you describe, they'll have to simplify the tax code first.
But one's nirvana is another tax accountant's unemployment.
This is the problem with America, once enough people's income depended on something, that something will continue for a long long time.
It's simple for the vast majority of people (Score:2)
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Re: I don't want to file (Score:2)
This. A thousand times this. I am so tired of the IRS accepting a return and then coming back to me years later with a letter saying they are modifying my return from years past and that I owe them even more money. Either the IRS is totally incompetent, or they have found a new way to squeeze even more money out of taxpayers by knowingly accepting incorrect returns and purposefully sitting on them until they can come back with interest and penalties to add onto the bill.
They already have all the information
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Be careful what you wish for... they might be happy to just bill you, but that won't be enough. My wife is currently doing battle with the IRS over $248 from 2020... they originally wanted $760; I wrote a letter and requested an adjustment and they refunded $512. I would have called it a day at that (after 4 months of phone calls/letters/waiting) but my wife isn't done with it... part of the problem appears to be a $252 Social Security overpayment refund that was entered as $2.52. None of the IRS letters
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They don't want you to get all the credit you are entitled to
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This was talked about on one of the economics podcasts, just can't remember
Let's pick the low-hanging fruit first (Score:3)
Eliminate estimated taxes [irs.gov]. What's that? You may not be aware that we all technically owe taxes for the upcoming quarter on the income that we are projected to make. Most people get income reported on W-2, and the withholding covers it properly. You generally don't get exposed to the concept of estimated tax unless you're self employed, own a business, get most of your income from investments, etc.
That's right, folks. There is no "fucking bill" in the traditional sense, because you're required to be a s
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That's never going to change because while it's annoying, only a very small segment of the population cares. Stock options have similarly annoying tax rules, arguably worse, but it only affects a small segment of the population, so no one cares. There are really stupid laws about taxing lottery ticket winnings, but again, most people aren't affected.
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Don't blame the IRS, blame Congress which has been starving them of funding. If you read the article, they have no choice to be as unmechanized as they are. And they don't like it. Congress had to step in an allow them to even do this study (and it is only a study and I'm not sure it is even being assured funding yet). The IRS more or less was shotgunned into doing a deal with Intuit and H&R Block to let those companies do the efiling and charge for it. I don't efile because of that.
Another feature of o
Good enough for most? Maybe (Score:2)
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Until around 2005 I was able to file over the phone in 15 minutes through the automated IRS system. The IRS already had my W2s so I just had to confirm that the numbers were right.
Unfortunately tax preparation companies lobbied and the phone system was disabled.
Government studies (Score:2)
It's amazing how much the government studies but doesn't seem to learn anything.
Re:Government studies (Score:4, Interesting)
If the voters mattered at all it wouldn't be so much of a problem, but they don't, and it is.
The sentence in the summary that says:
But the IRS has lacked the funding -- or the clout to outmaneuver private lobbyists...
is the give away there.
Re: Government studies (Score:5, Insightful)
Re: Government studies (Score:4, Insightful)
I think that some of your Republicans don't really want that though.
Re: Government studies (Score:2)
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Apparently you've never listened to a single GOP candidate or politician, ever. The slogan for my entire lifetime has been that tax filing should be made so simple you can fill out your taxes on a postcard. That was the sales pitch for Trump's tax law as well. Of course, it's nonsense.
I assume you've also never done your own taxes. If you had, you'd know that there are dozens (hundreds?) of potential deductions/credits, all for different special interests that at some point some politician decided to make a
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You assume incorrectly. I have been filing taxes for 24 years, and for most of those years I have done it myself.
GOP politicians may say that they want tax filing to be easier or cheaper. However, they work behind the scenes to ensure that it never happens. And you have correctly pointed to a perfect example of this phenomenon. The GOP said that they would make tax filing simpler and cheaper if you just supported their huge tax break for the wealthy and corporations. They gave them their huge tax break, but
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Oh, they'll learn plenty. Then they'll hand off what they learned to the highest bidder, er, I'm sorry, briber, wait, no, I mean lobbyist and pretend that they didn't do the study at all so they can get more funding for it a few years down the line. The American taxpayer pays to make sure the corporations can keep control. It's the American way!
I've been using the freefillableforms site (Score:2)
But honestly, if I weren't old enough to remember filling out paper forms in the past... I could see how that site might seem too intimidating for many people.
There's really no excuse for the current setup. Accounting firms can still have their bread-and-butter corporate and wealthy clients; but everyone should have a straightforward way to electronically file a 1040 with the common schedules, for free.
Lobbying (Score:3)
he IRS has lacked the funding -- or the clout to outmaneuver private lobbyists
Seriously: Why is lobbying even a thing?
If a president wants to do something to mage everything great again he can start by eliminating lobbying.
(Guess who has to vote to approve that decision though...)
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Because contributing to a lobbying organization is a relatively efficient way to communicate with legislators. It's not like anyone's going to read your emails or listen to your phone messages, and it's not like you've got time for anything else unless you're rich, retired, or a crackpot.
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Because contributing to a lobbying organization is a relatively efficient way to communicate with legislators.
I'm sure my personal contributions will never match those of a mega-corp.
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Er, the point is that it's more than your personal contributions, it's yours and potentially a few million like-minded people. See high-profile examples like the AARP, ACLU, NRA, and smaller or state-level groups for small businesses, farmers, women, minorities, etc.
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Or to put it another way, do you have the free time to hang around the offices of your elected representatives? How about going to DC or your State Capitol to make your case to multiple office-holders? If you don't, you might consider
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This will go nowhere (Score:5, Insightful)
But Turbotax alone can purchase enough state reps to kill this dead as a doornail. Republicans will call it big government socialism, Democrats will come up with who-knows-what excuse. Everyone will take the lobbyist money. Dead. On. Arrival.
Re:This will go nowhere (Score:5, Informative)
It’s an awesome idea that should have been implemented 10 years ago.
TEN years ago? Try THIRTY years ago. Brazil, whose development status is not as great as the USA, did it in friggin' 1991 [translate.goog]. This is how the IRS is late to the party.
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There's more. Surprisingly, the provided-for-free tax filling software doesn't suck, it's easy to use, and it's multiplataform (Java). Now there's even an web app if you don't want to install anything.
And there's a great new feature lately, depending on your Gov.br account status (must be "gold", which is fairly easy to obtain, i.e. using a personal digital certificate to login grants instant gold status), in the web app the forms come pre-filled.
I used the web app like this this year, just reviewed and upd
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This doesn't help the little guy. Helping the little guy would be Congress simplifying the tax code so that people don't need help or online software. This just entrenches another program within the Federal government that will need more funding and more staffing year after year to maintain. There will be no incentive for the free filing to maximize deductions (something which would not be needed with a simplified tax code). Are they planning on covering returns for all 50 states as well? Or will peopl
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As TFA says, state taxes are one of the main reasons people need to pay for tax filing software. It seems inconceivable that the IRS will cover all 50 states individual tax codes in their software.
Also, $15 million for a government-funded piece of software is practically nothing. I'd be surprised if they can even finish the study for that amount of money.
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Oh... wait a minute...
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This will not be efficient. As all things government, it will keep bloating and bloating in staff and resources while likely not improving in any discernible way year after year.
Have I got some news about private software companies for you...
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It essentially was. 20 years ago I filed by phone (they had an automated system). It just took a few minutes to verify that the IRS had my correct info.
Then due to lobbying pressure the phone system was disabled. So actually our tax system has regressed in the last 20 years.
Pencil and Paper Forms (Score:2)
Easy way, won't happen. (Score:2)
For one thing, the article talks about Free E-filing, but I think the program is actually about online free tax preparation.
E-Filing is a simple problem. The IRS puts up forms, and you do the calculations and type in the numbers. Even just that would be nice, but sooo many people cannot do arithmetic.
I've used FreeTaxUSA for tax preparation. I mention that one because I've actually used it, but I've also used the brand names and another products over the years. I also put the 1040 rules in a spreadsheet to
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MyGov Australia (Score:5, Informative)
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For most Brits, the most involvement they will have with the tax office is a bit of paper once a year from their employer saying how much tax they paid that year.
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And thats why your taxes are complicated. UK taxes are designed to be as simple as possible for most people - for example, I fall outside the "norm" because I have rental income. Now, I could just let my letting agency handle the income tax, but because I know the rental income is less than my annual tax free allowance, rather than claim it back at the end of the year I just handle the income tax myself - and all that takes is a
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For us Aussies who have nothing much to claim the process of filing via the MyGov web site is down to about 30 minutes, most entries are prefilled. Refunds within 14 days.
MyGov seems like a great idea, until you do a search for "MyGov data breach" and any given year since MyGov was introduced.
This was enough to drive me away from MyGov. It's been a few years now, so I don't know if their ongoing breaches even make the news anymore.
My other big concern with MyGov is that it's optional for rich people. If you never claim Centrelink benefits and have an accountant to do your taxes, you never need a MyGov account. Imposing MyGov only on poor people makes me extremely suspicious.
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Yes, it's optional, unless you are poor. That's my objection. The blanket data harvesting and ongoing breaches of MyGov are only optional for people of a certain wealth threshold.
Australia gets it right... (Score:2)
The Australian Tax Office has a 100% free secure online filing system that automatically collects the information that it already has from employers, banks, government agencies and others and fills most of the information in for you. Then you go in and fill in anything else (such as tax deductions) and submit it.
Of course our tax system is a lot simpler than the US (we don't have state income taxes for one thing)
It won't be easy (Score:2)
Creating software that is able to guide "regular" users through a complex tax system is hard. If the IRS turns its existing forms into fillable web forms, people will still need to use commercial software, because few can actually understand those forms that only a bureaucrat could love. There aren't many government web sites that are well-designed and easy to use. Most are rather clunky and outdated. I hope the IRS does better, but we shall see.
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Creating software that is able to guide "regular" users through a complex tax system is hard.
The UK manages it. Most fields have help like "This is the figure in box 3 on your P60", the P60 is the end of tax year form that employers must give all employees.
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I wonder how complex the UK tax code is, compared to the US tax code.
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I wonder how complex the UK tax code is, compared to the US tax code.
From what I've seen of the paper forms for a simple declaration of one salary, some charitable donations and expenses it's pretty similar for federal taxes. As she was not living in the USA my wife did not have any state taxes. I admit that many people have much more complex tax affairs so the comparrison may only hold for straightforward cases.
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Creating software that is able to guide "regular" users through a complex tax system is hard.
No it's not. Give the user a prefilled form. Ask them, "Does line 6 match the number on your W2?" If it matches, then press submit.
It's about time! (Score:5, Interesting)
It's not just lobbying, Intuit has been using outright deception and underhanded tactics to keep the IRS from offering free options.
https://www.propublica.org/art... [propublica.org]
There has to be a crime in there somewhere...I mean, other than the crime of the tax code itself.
Open Source For The Rescue? (Score:2)
I don't know much about American tax system, so this maybe can sound like a naive question, but... Isn't this a perfect case for a free and open source software solution? What are the impediments? Complexity? Legal accountability? Does this software needs a permit by IRS?
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The tax code is insanely complicated, and it changes every year. Oh, and there are 50 more state tax codes (well technically several fewer, since some states don't have any income tax, but roll with me here), and those change every year too. It's no small task to keep up with all of that, and there can be big consequences for users if you mess it up.
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Isn't this a perfect case for a free and open source software solution?
To compound everything arosenfield stated below...there's also the matter of deadlines. If a Firefox release takes three weeks longer than expected, it doesn't really matter, the current version still shows websites. If a Libreoffice release takes three weeks longer than expected, it doesn't really matter, one can still Write and Calc and Base without an issue.
Tax prep software - which includes integrating the new tax code - MUST be done by a basically-immovable deadline. "when it's done" is not a viable an
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About a decade ago, the IRS was going to release some tax forms as PDFs that did the tax calculations for you.
Tax accounting firms lobbied hard against it, and the PDFs were removed. The same thing happened to the Telefile system.
In South America we've had it for years (Score:2)
I live in South America and most countries around here have had free e-filing for years. In fact, I don't even know how to do it otherwise. I don't remember seeing a paper form.
My wife used to just fill in paper forms (Score:2)
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The USA joins the 20th century! (Score:2)
In developed countries, most people don't need to file a tax return. The tax department alredy has all the relevant information. And filing online is free. What sort of dystopia requires you to buy commercial software to file your taxes?
Hold on a minute, I smell BS. (Score:2)
Why do they need $15 million to study something that has already
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Oh, the Inflation Reduction Act? I guess that name was a lie if the act was actually about healthcare and climate
The names of laws have been lies for 50 years at least.
US Tax system is antiquated, broken and corrupt (Score:2)
Income tax, in 2022? USA should move to a consumption tax and get rid of this massive time-suck of April 15
H&R block fills a need that shouldn't exist.
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Consumption taxes are regressive, they penalize the poor.
Easy button (Score:2)
Catch 22 (Score:2)
Back in the 80s, Congress retroactively changed a tax law after April 15; I forget what exactly. This made me owe like $80 more in taxes. When I soon got the bill from the IRS, I promptly paid the $80. A while later I got another bill from the IRS: like $120 penalty for paying my taxes late, because I paid the $80 after April 15.
FreeTaxUSA (Score:2)
Correction: Federal e-filing is already free. What the IRS doesn't have is free tax prep software to go with their free e-filing. However, a few years back, I found FreeTaxUSA. It offers 100% free tax prep + federal e-filing. And e-filing state returns is not free in the software but is a fraction of the cost of the competition.
H&R Block, TurboTax, TaxAct, and others can eat crow for charging money for free Federal tax prep and e-filing.
What came first, the study or the committee? (Score:2)
The Internal Revenue Service will spend $15 million studying a free, government-backed tax filing system
This "studying" sounds really serious. Something significant might arise from this ... something like a "committee."