Precisely why I built https://freetofile.com (it’s a simple static site with React for internationalization that automatically renders in Spanish, Chinese, Haitian Creole, or English depending on browser settings). It’s shocking and depressing how many low income people don’t know they don’t need to spend $100-200 to file their taxes.
I want to blanket my area (well the whole country really but baby steps…) in signs with the URL during tax season. I really do loathe the entire industry at this point due to their gross practices around free filing. Some offer “free” online filing but deceptively upsell until they squeeze some money out of the customer. So I want to make any little push back I can against these companies.
My mom spends easily that much with her tax preparer who is an independent person who tries to dissuade usage of software like TurboTax. My sister spends about $100 to file, and they have simple W-2 stuff. I know several folks at my church who spend $50-$75 on TurboTax or something similar every year.
I just spent like $200 to file mine with TurboTax only because I have a very simple 1099-K/Schedule C since my wife sells things on Etsy. I know Schedule C can range from my simple setup to absolutely ridiculous, so I don't totally grudge it. But at the same time, there are a lot of small business owners where that's a big chunk of change for them.
After a recent post[0] suggesting the federal tax code was already online in machine readable form, my first thought was "could I write my own US tax-filing software?" But the answer is still no.
Paying taxes doesn't mean just paying federal taxes. Users don't want free Federal taxes software if it means they'll have to re-renter all their information into different software for their State taxes -- especially when more than one state is involved, such as for people who cross state lines for work, or moved mid-year. A tax service is a massive value add.
The "free" software you get to do your federal taxes will be no threat to TurboTax until the states are required to publish their tax codes in the same machine readable format as the feds.
Depends on the state, some have higher property taxes.
Higher sales tax tends to be regressive because it doesn’t tax money you don’t spend, nor does it tax things where sales tax doesn’t apply like buying assets.
Taxes are crazy anyhow. The government won't tell me how much I owe, but if I'm incompetent enough at figuring out the number, suddenly they both have a clear idea of what I owe and also I'm now in trouble. Why doesn't the government just tell me what I owe, and if I think they've calculated incorrectly, only then do I do my own filing or hire a CPA or whatever else?
> Why doesn't the government just tell me what I owe, and if I think they've calculated incorrectly, only then do I do my own filing or hire a CPA or whatever else?
The tax filing industry is against it, essentially. Various attempts by the IRS to move in this direction have been stopped.
There used to be a libertarian wing that thought paying taxes should be a little painful so people wouldn't vote for more taxes, but I've not heard anyone say that since the bush era.
One reason is that the US tax code is horribly complicated compared to anyone else, because we have tried to enact all sorts of social policy and subsidy through the tax code, because it was somehow more politically palatable to do it that way.
If the government can determine that my taxes are wrong, then they know the amount I have to pay. So why can't they tell me the correct number up front? (Yes, I know the reason why, but I still feel like it's a valid question)
I've always wondered if I could file some kind of freedom of information act request to get the IRS's opinion of what my taxes should be; and/or to get the source code to the IRS's program to calculate what their opinion of my taxes should be.
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That being said, my Dad worked for a few years at the IRS part-time before he finally retired. He loved it. (My Dad is one of those people who enjoys taxes and finds them soothing.) I concluded that the IRS is a white-collar make-work program. It also leaks a lot of confidential social information, because he got to see all kinds of tax returns from all slices of economic status.
They can determine your taxes are "fishy" and then demand further documentation. Say you declared you sold a car and profited, but seemingly under-reported the sale price. They'd show up and demand to see the bill-of-sale, maybe contact the buyer, etc. How would the government know ahead of time what price you sold the car for?
Most fraud about car sales is to claim a lower price in order to skip on sales taxes collected by the states' motor vehicle agencies. Not all states charge a sales tax on individual-to-individual sales. Here in Kentucky, the state constitution says that taxes have to be charged on the assessed value, so part of the annual registration is based on the assessed value (min $100 for boats or $200 for cars/trucks). I used to work for KY's Transportation Cabinet (combo DMV + highway dept).
>I used to work for KY's Transportation Cabinet (combo DMV + highway dept).
What magic word so I punch into the internet or who do I ask to get my hands on an old edition of those massive desk reference books that DMV clerks and their managers use to advise them on the application of the rules?
Or are they destroyed when obsolete to prevent the peasants from knowing how the sausage is made?
(yes I know the answer won't necessarily translate to other states)
These examples are silly, most people are not selling a car privately all the time and they can handle any reporting or changes when you transfer the ownership.
In many countries for the majority of the population they can and do determine how much tax should be paid, and many people don’t have to file tax returns.
Because most people don't know how simple doing their own taxes are. This is aided by a few people who have a complex situation and would have to have a real accountant do their taxes in every country.
Things that need work necessarily cost money. Someone doing the work for free is not inherently sustainable. Profits motivate work to get done all on its own. Profits by definition is money over and above expenses. So it creates a perpetual sustainable mechanism. Competition motivates quality and efficient pricing (eventually).
Lobbying corrupts this a bit. However they are not lobbying to suppress private competitors only government-run competition that has no profit motive or competition. When the government runs it we still pay for it, except now people who don’t use it also pay. Also wealthy people pay a disproportionate share as compared to their use due to progressive income tax.
In theory anyone can start a company if they have a better or more efficient product or offering and get the profits instead.
The usual argument is that taxes are already paying for the collection of data and calculation of amount, so why can't we just use the figure already calculated by default? This is most true for W2 employees without any uncommon circumstances, but there would seem to be a lot of people covered under that.
It's a political challenge, not a technical one. There are constituencies that reap concentrated benefits from the current system (e.g., tax-filing services) while imposing disperse costs on everyone else. Also, there are those who believe that the IRS is out to get them, so filing your own taxes is more trustworthy than going with a government-issued pre-filled default. And that going through the motions makes the pain of paying taxes more salient, so you're more likely to complain about it.
If you look at it as a practical or technical challenge, you're addressing the wrong question.
> However they are not lobbying to suppress private competitors only government-run competition that has no profit motive or competition.
But there is a profit (or rather income generation) motive: taxation is what funds the government. Parceling this work to a private 3rd party means paying a bunch of salaries that are much higher than what government employees get paid, generating profit for the company that gets taken out of the tax revenue, which increases the cost of the service for end users or the government receiving income.
Some politicians argue that government is inept and wasteful, and sponsoring no-nonsense projects that reduce middlemen in this process interferes with that narrative. If you got into office screaming that the government is your enemy, you’re not going to support projects that make it easier for citizens to interact with the government.
The 18F team was doing remarkable work devoid of all profit motives, before it was gutted by this admin. Americans are missing out on a lot of QoL improvements based purely on the false belief that private is always better than public. In France, they're rolling out a new system where your taxes are filed fully automatically, and you get a PDF in your emails with a one page recap, telling you to only contact the admin if you feel like something is wrong with the recap.
Your take is the classic economist's "it works in practice, but does it work in theory?". Obviously tax filing works better when it's maintained by the government. You're severly underestimating the harmfulness of profiteering monopolies lobbying against any improvements and buying out the competition. Also, look at DOGE, with all the ruckus they made they just couldn't find that many inefficiencies. And for such "simple" software projects as a tax-filing platform, I just don't buy that private is better than public.
Indeed, and tbh "work must be paid for" is not necessarily a bad thing. In the Netherlands we pay for our tax-software via our taxes (and I still spend about 250 eur on an accountant to do it for me, as it takes me a whole evening as an someone with a (small) company, I'm better of writing hours), is it the most efficient? I think not, judging from how much our government spends on IT projects that fail. There are a lot of hidden costs.
That said, the lobbying is really bad of course, probably also prevents cheaper or FOSS alternatives.
In Germany tax-prep industry is huge, there is a huge network of tax consultants plus paid online services like taxfix and smartsteuer.
The only countries I lived which didn't require you to declare the taxes were Russia and Georgia, mostly because 13% and 20% flat tax rate respectively.
Any country which does have complicated progressive tax system would require you to declare taxes at least at some cases.
Germany has ELSTER, which is a free government provided online service. I use it every year to fill in my tax declaration.
It's not perfect but it works pretty good. Not so friendly for expats since it doesn't have internationalisation, so you need to know a bit of german (I use G translate).
ELSTER is available but it is extremely complicated to use. Not even my Tax advisor uses it directly. You must be the first person I’ve heard that uses it directly.
For me not worth to use it having extremely good tools like the offering from WISO.
In my opinion a complicated tax law is a direct attack from the State against low and middle income population. If you have low income and poor education you will not be able to make use of the tax law to increase your available income, something that high income citizens do daily.
In this case we have to thank the free market to provide really easy tools for less than €30 so middle and low income citizens can start at least to take advantage of the tax law.
I’ve lived in multiple countries and always did my tax report myself. And the German situation is so blatantly designed, compared to other countries, to benefit only a very small portion of the population.
Not only that, If the amount of man/hours that the whole country of Germany spends doing taxes would be spent on productivity gains or just normal work, the country would become immediately the richest country in the world. Instead, it’s just wasted effort and work.
I’ve used Elster to file my German taxes until I left the country. Very common to use that software directly. Probably not much fun though if one’s situation isn’t straight forward.
There is a world of difference between not having to declare taxes, and having an industry of tax filers.
In France you have to declare taxes, but everything known to the tax authorities is pre-filled, leaving you to add any special incomes/deductions that didn't come trough regular channels that get automatically reported.
You still have tax consultants to help you optimise if there are higher revenues, but it's a very niche service.
Germany, as a de-facto vassal state of the US, is the exception that confirms the rule. This is an observation that comes from almost a lifetime of living in this region of our world.
You can do taxes yourself for free most of the time. Millions of us do every year. The IRS estimates that 70% of tax payers could file for free.
> Why must every service and thing in the US must be a private profit making thing?
It isn't. There are roughly 2 million nonprofits. "Nonprofit organizations play a significant role in the US economy. In 2022, there were 1.97 million nonprofits operating in the US"
And there are endless government programs and millions of government employees. The federal government alone spends over $6 trillion of our money, and money we don't have, per year, and most of it is on mandatory social programs.
"About 60% of all federal spending is categorized as mandatory spending — which amounted to $3.8 trillion last year. This spending is essentially on autopilot because it funds programs whose eligibility rules and benefit formulas are set in law. This consists mostly of programs like Social Security, Medicare, Medicaid and Veterans care."
I think the point is that the vast majority of people don't really have a unique tax situation. And all the data already exists. There's just no framework set up to allow this to be automated like there is in other countries.
It should be the case that all your basic taxes get calculated for you and taken at the point you're paid by your employer. Anything exceptional should be able to be claimed back via a web portal somewhere.
So it's not like 160m tax returns NEED to be filed. That's just how it is today.
There are a lot less loop holes than in the past. In the 1950s taxes on the rich were 90% - but there were so many loopholes the rich in reality paid a similar tax rate to their peers today where the tax rates are lower, but there are also less loopholes.
In the 1950s the common person couldn't take advantage of most loopholes (I'm not old enough to remember, but I'd guess mortgage interest was the only useful one, the rest where $100 here and there but it never added up to much for the common person)
Yes, you can download the form 1040 and fill it by yourself, you'd need a few Schedules attached. They all have instructions available online, your work has to send you a copy of everything they paid you and into the IRS (regular jobs always err on the side of overpaying), and while it is not hard, it definitely looks intimidating and takes time to understand, especially the deductions.
You can also just not file your taxes, if you don't owe anything (and as I said, jobs always err on the side of overpaying) they won't bother you, but most people end up eligible for the tax refund, so it is more beneficial to pay for that service.
Sad part is, when I started working, this was normal. My father showed me how to do it. I did it for a few years and then TurboTax came along and I used that for free. Then they rug pulled me into a deluxe one year because I had 1099 income and ever since I’ve been jailed into paying if I want to use them. 1099 or not.
I used to do that every year. It wasn't hard. However one year I forgot to copy line 12b from form 9876 to line 34c of form 5432 and when the IRS caught that I had a big mess to clean up (since state taxes copy federal taxes so I had to refile state with the corrected numbers...). Now I just pay a small fee to FreeTaxUSA (I figure they deserve some money for their efforts in creating software).
One thing I can say for sure: doing taxes with a computer takes me longer than filling out the paper forms by hand! There are so many delays while "calculated" (as if a ghz computer can't add numbers fast), and loading question pages that I can obviously skip (I never worked for the rail road, I'm not blind...) but take extra time because of how they setup the UI.
Besides the point. The point I was making is that because I had one year of 1099 income in the past, I was paywalled into paying. I no longer use TurboTax as my tax needs have changed. Thanks though but I wasn’t soliciting for alternatives.
I have done this a few times, but for me it takes several hours and I always am worried I have made a mistake. If you have simple investments you can still run into confusing things that are very hard to follow.
> You can also just not file your taxes, if you don't owe anything (and as I said, jobs always err on the side of overpaying) they won't bother you
From the IRS website:
>Who must file
>Most U.S. citizens or permanent residents who work in the U.S. have to file a tax return.
>Generally, you need to file if:
> Your income is over the filing requirement
> You have over $400 in net earnings from self-employment (side jobs or other independent work)
> You had other situations that require you to file
Not sure if your intent was to discourage filing, but it read that way to me.
I don’t know why assume that in every country in the world that is free. In my European country until 15 years ago or so you had to hire someone to do your taxes for you, and currently the free method only works for the most simple tax filing. In fact what you get is called a “draft” of your tax filings because you’re supposed to make sure it’s okay, and it’s your responsibility if you miss something or if the draft is wrong.
And obviously the draft usually assumes that you will have to pay more tax, since there’s a perverse incentive given it’s the government who fills it for you.
The short answer is central banks are not setup to offer services directly to the public.
This is different to the tax office in that people already need to interact directly with it! Anyone in the UK can fill out a Self Assessment, for example, however it's optional for almost everyone, because Pay As You Earn takes the tax off your employer instead.
In my country, all my tax is deducted from my salary before reaching to me.
For other things, I can go to a "Virtual Tax Office" with my browser or my mobile banking application and pay with cash or credit card, sometimes with zero interest installments, even.
The reason this topic continually comes up is that people in the US are stupid and bad at math, and the IRS is very heavy-handed and issues penalties for minor tax errors, so people are afraid to interact with the process without a trusted intermediary.
When people say they are “paying their taxes”, really what they’re doing is checking whether the automatic tax deduction out of each paycheck was properly calculated over the whole year, and whether any special circumstances make them eligible for a refund (or whether they’ve had other income they need to pay tax on).
If you happen to be an entrepreneur, a foreigner (relative to the country of work), or an American citizen (despite holding the citizenship you're on, thanks FATCA!), then, yeah, I can see why you have never encountered the simpler arrangements.
If you're an ordinary citizen of most countries and work under a company, the company is obliged to track it for you. What you get is a very simplified form asking if you have more income sources than from your work, and the local tax system means that most of them legally do not have any (for example, banks collect the taxes for the interest you have received, not the arcane American system where you're the one responsible for that).
In a PAYE system, merely being a foreigner isn't _usually_ an issue, provided that you're domiciled and don't have foreign income. The exception, as you mention, would be a US citizen; the US's approach to foreign income of its citizens is sufficiently weird that they'll generally have annoying tax situations.
> What you get is a very simplified form asking if you have more income sources than from your work, and the local tax system means that most of them legally do not have any
If even that. In Ireland, and I believe the UK, you only have to fill out that form if you actually _do_ have non-employment income which is not deducted at source. Most peoples' only interaction with Irish Revenue would be to claim tax credits on rent/mortgage/medical expenditure/whatever.
> Why must every service and thing in the US must be a private profit making thing?
This is a side-effect of the Protestant Work Ethic. Weber coined the term in 1905 as a way to explain why the Northern European countries (who were predominantly Protestants) were wealthy while the Southern European countries (who were predominantly Catholic) were poor. Prior to the election of JFK as US President, anti-Catholic sentiments were widespread throughout the US (which explains why Irish & Italians were not considered "white" until the early 20th Century). Even today, many Evangelicals do not consider Catholics to be Christians.
> Calvin taught that all men must work, even the rich, because to work was the will of God. It was the duty of men to serve as God's instruments here on earth, to reshape the world in the fashion of the Kingdom of God, and to become a part of the continuing process of His creation (Braude, 1975). Men were not to lust after wealth, possessions, or easy living, but were to reinvest the profits of their labor into financing further ventures. Earnings were thus to be reinvested over and over again, ad infinitum, or to the end of time (Lipset, 1990). Using profits to help others rise from a lessor level of subsistence violated God's will since persons could only demonstrate that they were among the Elect through their own labor (Lipset, 1990).
> Selection of an occupation and pursuing it to achieve the greatest profit possible was considered by Calvinists to be a religious duty. Not only condoning, but encouraging the pursuit of unlimited profit was a radical departure from the Christian beliefs of the middle ages. In addition, unlike Luther, Calvin considered it appropriate to seek an occupation which would provide the greatest earnings possible. If that meant abandoning the family trade or profession, the change was not only allowed, but it was considered to be one's religious duty (Tilgher, 1930).
These 2 paragraphs also explain why many in the US have such an utter hatred for any sort of social safety net for poor people - those people are damned in the Biblical sense and therefore it is a sin to give them any sort of money, food or healthcare.
The tax preparation industry exists in much of the world.
Taxes are simple if you live in one place and only receive income from your employer. If you have multiple sources of income, connections to multiple countries, etc., things can get very complicated very fast. That's why the tax prep industry exists - and not just in the US.
That being said, the Internal Revenue Service could prepare the taxes of most Americans. A simple system of, "Here's what we think you owe, based on the information we have on hand - sign and submit if you agree" would work for most people.
> the Internal Revenue Service could prepare the taxes of most Americans
IRS Direct File[1] did exactly this. It apparently worked really well, and people liked using it, netting ~$20 billion in savings to the Americans that used it (roughly half of that came out of the pockets of the tax-prep industry).
Then, DOGE got to it and the new administration's IRS commissioner killed the program.
In Australia, if you work in multiple places and at multiple companies, it’s still trivial to file your own taxes. You log in to the government portal, where the collected amounts of tax from each income source, including bank interest, is listed. It can get more complicated if you have your own business but for the majority of people it’s easy and doesn’t require a third party.
Australia has a progressive tax structure, right? If you have multiple income sources how does each source know the proper withholdings? How do they know what deductions you'll be eligible for or are wanting to take?
I don't understand how these could be issues. They aren't in my country.
You're still responsible.
Tell each company how much to withhold.
If they take too much, you get it back when you file taxes.
If they don't take enough, you pay a penalty for having too large of a bill when you file.
The issues you mention exist regardless of how many employers you have, because you can have income that does not come from an employer (e.g. stock dividends).
If it works anything like what we've got in Norway, they take a rough percentage, and once every year when the taxes are filed, the IRS equivalent charges or repays the missing amount.
In the UK you get a code based on last year’s earnings, which the company uses to set a flat rate of withholding on each paycheck. If there’s any discrepancy that usually just feeds into next year’s code.
In Australia, you probably need to tell the companies about the other income sources, and they will attempt to withhold at the appropriate rate. Then at the end of financial year, you go to your pre-filled online tax return which has all the figures reported by each company you work for already present and sums up whether there’s a refund or payment due. This is also where you enter any deductions.
> A simple system of, "Here's what we think you owe, based on the information we have on hand - sign and submit if you agree" would work for most people.
They already do that -- if you calculate your taxes wrong, they will send the adjustment (they will do it both ways, pay you back or ask for the remainder). I guess they might not be aware of all the deductions, but standard deduction beats itemized one for the majority, so they can 100% automate this whole process if they decide to. For complex cases and businesses, sure, you are on your own, but at least most W2 should be covered.
Yes, but tax filers have potential civil and criminal liability risk if they make a mistake.
Presumably much less if one pays more than the IRS calculates is owed.
Essentially both the IRS and tax filers verify correctness of the tax filer's return and the tax filer can be prosecuted if they make a mistake according to the IRS.
> Yes, but tax filers have potential civil and criminal liability risk if they make a mistake.
How is this an issue? Why would it be different under another system?
I see you posting a lot of what I think are pro-tax-prep messages but they don't seem to have any substance. Please try to take them to the conclusion of an argument. (That is, finish by connecting the facts you are posting with some assertion about the desirability of the current system, or some assertion the parent has made.)
What I mean to highlight is that although a mistake in filing may lead to the IRS rectifying the mistake by sending/requesting the error balance, there are other possible effects, including civil and criminal liabilities.
This is undesirable. As mentioned in many comments here, the vast majority of filers, especially those with one employer and no substantial investment income, should not be required to file their taxes and instead the IRS should communicate the calculation result and ask if the filer disagrees.
This is a classic problem related to the "you slice, I choose" false dichotomy[0]. Essentially, even assuming it costs zero time to fill out and file a tax return, any mistake at all could lead to a negative consequence to filer.
As an aside, always choose to choose and not to cut the cake :)
Right, when the Europeans say the tax is paid as you earn and the authorities let you file differences free and easily, they mean the vast majority of tax payers. It is rare to be the exception.
Whereas I guess American Exceptionism (tm) means you all have to pay a rent seeking company to file taxes…?
In Ireland, and I think many other countries, if you have under 6k non-employment income, it’s ~trivial; you fill in a form on the website. It only gets complicated over that (though you would still typically do it all online; the form just gets _a lot_ scarier)
As an European with multiple sources of income, all that boils down to is literally excel style fill in the boxes deal. There's even free tools that can handle the simple formulas if I don't trust my calculator enough. 1 hour a year at absolute worst; definitely no space for a finacial parasite to latch onto.
You have a very simple tax situation. Many people do not.
In the US, if you just have wage/salary income and an investment account, and you lived the entire year in one state, your taxes are also very simple. You can fill everything out yourself in one evening, or pay $100 to do it with tax preparation software.
But things can rapidly get complicated. Did you move from one state to another during the year? Do you live in one state but work for an employer in a different state? Are there any credits or deductions you're eligible for? Or god forbid you live abroad, at which point you're dealing with double-taxation treaties and the like.
No, they would know exactly what they know now. Employers already report your earnings to both the federal and state IRS agencies and pay your withholdings automatically adjusted for your dependencies. So a simple form that says you made X and claimed Y dependencies. Click submit to confirm…
That would be simple enough for most people (1 job, 1 home, maybe some kids) and it doesn’t require the government to know anything additional.
In that most common scenario no tax accounting service should be needed. Honestly a 1040 isn’t that complicated in that scenario either, but is still too difficult for a good number of people and it’s just unnecessary.
How exactly? Currently, you report your earnings, your employers report what they've paid you, and banks report specific transactions. How does simplifying/eliminating the deduction process (which is all that an accountant is doing) give the government more info about you?
This one government agency would need to know the superset of everything about you that could possibly be reported on any tax form. The simple case breaks down quickly. If taxes were redesigned to become overall much simpler, then sure, the reporting could be much simpler and more passive for the filer.
Businesses paying people already file copies of the W-2s and 1099s that they send to their employees with the IRS, meaning that, for a very large chunk of Americans, the IRS already knows everything needed to fill out their tax forms.
Having lived in both the US and several European countries, America is already the privacy nightmare because all your data is with corporations who can do absolutely anything with it. European-style effortless automatic tax filing certainly wouldn’t make it any worse.
(Also it’s rather ironic that people who think like you have been voting for the party which is currently enabling Palantir to build Chinese-style surveillance in America. But as long as the data is owned by billionaires and they promise to only use it against the “others”, I guess it’s fine.)
In the UK, for example, if you are a simple case (PAYE employee, no other sources of income) they just do it, you never interact with HMRC at all in the ordinary procession of things. You may get a yearly summary form (P60) but that's about it.
Here in Australia everyone must fill in an annual return, but it’s a fairly well automated online system and they’re probably already already have most of the fields filled in, you just need to add anything more complicated or any deductions you think you’re owed.
In both systems you can have an accountant file for you, or use other software, but you don't need to and most British people will never file a single return in their lives.
I never understood why the Revenue can't provide a set of simple online forms for tax returns like India does. Heck, India provided Excel sheets with VBA script for many years, that produced an XML which can be submitted as tax filing. Tax filing is now a 15-minute affair for a salary-only income in India.
The complexity is a feature not a bug. If you have more complexity, you have more opportunities for loopholes. Those loopholes are currently used by those wealthy enough to hire creative firms to help them get through them and minimize owed taxes
If there’s one outcome I really hope from AI automating work, it’s taking away the advantage the monied class has in this regard. Then perhaps there’s less purpose for the complexity
Maybe the AI will create a level playing field and make the tax prep / loophole industry collapse.
Or maybe the free models will start responding with
"""
It looks like you're asking for help with tax preparation. I recommend our designated AI tax service [link to service that asks you to upgrade your plan or pay a one-time fee].
"""
They are operating free models at a loss now, but at some point they are going to have to turn a profit. At that point tax prep becomes a revenue stream for AI as well.
Much of the complexity is to close loopholes. Many things in the tax code start out fairly simple, then people find ways to use them in ways that were not intended, and then the simple thing becomes complex as additional rules are added to try to fix that. This can iterate and what started out as a couple of sentences that most people knew what they intended becomes a few pages of convoluted rules.
They could still live side by side. You could still have a system where you have simplified filing where for 99.99% of the people you can just pretty much fill in one or two fields of what you made and something like that and even maybe get this data directly from the employers. That's how it works in Sweden. And then for the people who have complicated business, you could have a more complicated form where you need to hire a lawyer or accountant to do it. This is just assuming you don't care about whether or not there are loopholes for people. Like that's a political decision maybe more, because I guess the people defending them would say that there are good reasons they exist and you know wealth creation and so on. But it makes no sense to make it so complicated for people who have very simple lives where they have one employer who is paying them a salary and that's it.
My entire life (in the US) there has been the idea floated that our tax code should be simplified to the point where filing can be done on something the size of a postcard.
We absolutely could do that, but the government has no incentive to do so. At least in the US, taxes are a form of control, a source of power for those in charge, a political chip for elections, and a mechanism to further the wealth divide. Taxes are not primarily meant to fund our government, and definitely don't include goals related to making the average person's life easier.
Of course, this is not to say they always are stupid or illiterate, it's again usually just another form of exploitation, they don't have (or feel they don't) time to read it.
Which is arguably explicit exploitation/enslavement - the Walmart door greeter doesn't have a difficult job, however their role doesn't allow them to do anything that would benefit themselves. I wouldn't care if they were reading their phones or a book, but noo... can't have the peasants educating themselves.
And they aren't paid enough, so when they return home, they likely don't have any time after needing to perform meal prep, taking a second job, etc.
The USA is a third world country in many respects.
>The complexity is a feature not a bug. If you have more complexity, you have more opportunities for loopholes. Those loopholes are currently used by those wealthy enough to hire creative firms to help you get through them
Agreed that the complexity is a feature but it's not for the rich ( though the rich will take advantage of it, and why not? ) . It's mostly for the powers that be. If there were a 'flat' tax ( and one could argue what constitutes a flat tax) the rich will be more willing to pay that flat tax.
I'd say complexity support a very large govt, keeping several people employed including accountants, tax software companies etc. It serves the parasite class.
> If there were a 'flat' tax [...] the rich will be more willing to pay
That's just because moving from progressive-taxation to a flat-tax reduces how much they pay!
The "simplicity" of the math done by their usual accounting firm that does their taxes for them is irrelevant by comparison.
_________
To illustrate why the burden shifts, suppose the nation of Elbonia needs a constant $540 to operate, and it moves from a progressive tax to a flat tax.
This year, progressive taxation, rising %:
90 peasants each earn $10 and are taxed 20% -> $2 per peasant.
10 nobles each earn $90 and are taxed 40% -> $36 per noble.
Total collection is $540.
Next year, flat tax, same % for all:
90 peasants each earn $10 and are taxed 30% -> $3 per peasant.
10 nobles each earn $90 and are taxed 30% -> $27 per noble.
Total collection is $540.
It should be no surprise that most of the Elbonian nobles are "willing" to see that change happen. Meanwhile, the peasants that are already living paycheck-to-paycheck have to plan how to cut back on luxuries like keeping their teeth.
It's worth pointing out that the Treasury takes in tax revenues throughout the year. The sources of that income are:
50% Payroll Income Tax. 35% Social Security Taxes. 7% Business Taxes. 7% Excise Taxes.
70 years ago they were:
25% Payroll Income Tax. 25% Social Security Taxes. 25% Business Taxes. 25% Excise Taxes.
I think the priority is fixing this distribution to levels which were historically perceived as being more fair. The wealthy are one problem. The oversized corporations are the everlasting machine which drives them.
Excise taxes are effectively sales tax but only on specific products. This is less economically efficient than broad-based taxes unless the thing you're taxing is something you're specifically trying to discourage (e.g. cigarettes) rather than having the purpose of generating revenue, but since 1955 the government has become more inclined to ban things it doesn't like than tax them.
In a global economy higher business taxes just cause large international corporations to incorporate in a different jurisdiction, which gives them an advantage over smaller purely domestic corporations, which is bad.
Social Security is already taking in less money than it's paying out. Reducing the Social Security tax would imply reducing Social Security benefits, since that's where it goes, unless you're proposing a more significant reform of the system in general.
The size of corporations and the amount they're taxed are two entirely different things. Indeed, the tax code does a lot of things to encourage corporations to be larger, like taxing dividends and capital gains after corporate income has already been taxed, which creates a tax preference for leaving the money inside of an existing corporation rather than investing it in starting a new competitor.
To get accurate numbers you need to scale either the before or after numbers to reflect changes in the effective overall tax rate over the time period.
You also need to look at overall tax burden, not just federal. It used to be that the states levied taxes and did stuff. Now mostly what happens is that the feds levy taxes and piss it back onto the states in the form of grants to do qualifying stuff.
IDK how this distorts the percentages but it certainly does.
Another issue is that super wealthy folks don't get their money from regular wages. They borrow money from banks using their assets (e.g., stocks) as collateral. They pay back the loan at relatively low rates. The borrowed money is not taxable income.
>That's just because moving from progressive-taxation to a flat-tax reduces how much they pay!
They would be more than willing to be flat taxed at their current rate because it would still save them the hassle and the stress and the uncertainty.
Now, it would likely reduce what they pay eventually, because if you flat taxed the whole populous at their rate there'd be a new government pretty quick, but that's not the point.
> That's just because moving from progressive-taxation to a flat-tax reduces how much they pay!
That's what everybody says but then you look at effective tax rates in real life and the highest ones are paid by people like doctors rather than billionaires because the complicated system is the thing that allows the billionaires to pay less.
Meanwhile you don't need a complicated marginal rate system to get a progressive effective rate curve. Just give everybody a tax credit in a fixed amount and then use the same rate for everyone. Here's your table when you do that:
90 peasants each earn $10 and are taxed 42.5% and receive a $2.25 credit -> $2 per peasant, effective rate 20%
10 nobles each earn $90 and are taxed 42.5% and receive a $2.25 credit -> $36 per noble, effective rate 40%.
These numbers, of course, assume that as in your example you need the average effective rate (by earnings) to be 30%. By comparison, for example, US federal receipts as a percent of GDP have been stable at ~17% of GDP since the end of WWII (and were dramatically lower before that). Your numbers would be more in line with what would happen if both federal and all state taxes (including e.g. property tax) were replaced with this system.
That's not a progressive-tax brackets versus flat-tax thing.
That's a "having different rules for different ways of making money" thing.
> the complicated system is the thing that allows the billionaires to pay less
Something true of a parts is not necessarily true of the whole, and vice-versa. The reason billionaires pay less than we might expect comes from relatively simple factors, not because the tax-code is too complex for poor people to get the same result.
> That's a "having different rules for different ways of making money" thing.
That's the thing which is a consequence of the existing complexity, which in turn is a consequence of trying to do brackets by income.
A flat rate tax is you collect VAT on everything no exceptions, send everyone a check in a fixed amount as the credit to make it progressive no exceptions, and you're done.
Different marginal rates is oops, if you use VAT then rich people have poor people go to the store for them so you have to use income tax and track everybody's income. But some people get income from investments and then it's not realized until they cash out, which allows a bunch of fancy tax dodges, but trying to tax unrealized gains has a bunch of other serious problems like liquidity and valuation. Also, you didn't really mean to tax everyone's retirement savings, so now you need a bunch of stuff like 401(k) to undo the thing you didn't really mean to do, and now you have some more complexity. And it continues like this until you turn around and doctors are paying higher taxes than billionaires because billionaires have more resources to navigate all the complexity.
The tax brackets are not what make taxes complicated. Knowing how to categorize different types of income is what makes taxes complicated.
The flat tax would not make tax preparation any bit easier. They only thing it would do would be to eliminate progressive taxation. In other words, the rich would pay less. The poor would pay more.
> The flat tax would not make tax preparation any bit easier.
This is absolutely not true in the USA. Income from different sources is taxed differently.
Example: The forms distinguish between short term capital gains, long term capital gains, and e.g., income from government bonds is taxed differently at lower levels of government.
This is exactly correct. That said, I'm quite surprised how many people struggle to understand how progressive tax bands/brackets work. It maybe doesn't help that the (right wing) media often portray them dishonestly (i.e. claiming that a 50% tax band starting at $100k/year means you would pay $50k/year in tax if you earn $100k/year)
The UK has online forms for this, even for businesses, but is moving away from this as part of "Making Tax Digital" - i.e. they are axing paper forms to doing away with the online equivalents as well.
Then again, most people here who have salary only income do not have to fill in a tax return at all - only if they have certain types of income (self-employment, capital gains or investment income) above a threshold.
I've been doing Self Assessment for 25 years. In the first few years it was fill in a colourful paper form which won awards for clear English etc. Nowadays it is online with many details pre-filled in. At the end you can download a .pdf that looks exactly like the paper form or not bother.
Something like ~40% of US individual taxpayers only need to file a form 1040 [1] for their federal tax return.
Another large group will need that plus a small number of other forms, most of which will be easy to fill. For example if they are getting a tax credit to help with health insurance costs there is form for that. That one's easy to fill out because you will be mailed a report that contains the information needed for the form. The report is in a standard format, and the instructions will be of the form copy line X form the report to line Y of the form.
If your income is just salary plus some investment income from investments like mutual funds you don't have enough deductions to be worth itemizing [2], it generally is pretty straightforward.
[2] In the US you have a choice between "itemizing" your deductions, which means you have to list all of them, or taking the "standard" deduction, which is around $15k for a single person and around $30k for a married couple. Around 90% of people take the standard deduction.
The tax system in the US is complicated, you've got different state taxes as well as the federal, for example if your kids go to a different state for school than you live, add that your partner might work in another state, maybe they have different relief taxes for disasters through the year. It might very well be a feature but it is complicated, and the more activities you have, maybe investments, a small business, multiple jobs. It becomes overwhelming for non accountants.
Even the complex cases fit into an overarching tool. Most people in the UK don't submit tax returns because they don't have any income beyond their salary. Even if you do, you then use the tool which asks you a series of questions like "do you have a student loan?" and "did you receive any dividend income?", then you have to fill in some next level detail if those are true. I'm sure there are people with weird tax arrangements that need to work outside of the wizard, but I'd wager it was less than 1 in 1000, and those people tend to have the money to pay for fancy accountants to do it for them.
You also only need to fill in a tax return if you have income (or capital gains) above a threshold. SO having some interest paid on a savings account etc or a small side business or selling an asset at a small profit above what you paid for it does not mean you have to make a tax return.
I'm not sure how it is in the US, but in Canada a huge amount of low-income benefits are directly tied to filing your taxes. Most Canadians experienced this in our college years when we got GST (our VAT) refunds due to being low-income adults.
Canada recently announced that they're going to go for automated tax filing and it turns out the biggest cost may not be implementing it, but that they'd end up having to pay out a lot more in benefits to low income people that don't file.
Basically I only do mine in about 15 minutes, most spend on verifying what I actually paid for things. Because I go over of the basic deduction so I can deduct for workspace, internet and electronic equipment. But the workspace is going away so probably won't bother after this year.
Because it is (or was it the time this article was written) against the law. The company that owned the tax preparation software lobby to Congress to pass a law requiring that the IRS not provide a free and easy way for people to submit their taxes.
If you want to understand the first, take McDonalds - you probably have one and don't think it's that bad? Imagine everything on the menu is either 10 times sweeter (sickening), or made with wilted products on the cusp of expiration, and that's "standard" food.
It's so bad, many Americans hate anything "healthy" because any time they are exposed to it, it's not much better than pigs swill. So there are many who will only eat meat, because that is harder to make taste poorly, despite being even more disease riddled (there are almost no standards for meat inspection).
So then, you are constantly sick, low energy.
And then education - suffice it to say there are many communities where it is seen as "reasonable" to believe in nonsense like "flat earth", and many struggle with basic things like addition. It's a wonder we aren't illiterate too... I suppose it's too useful to be able to read about products to buy them, so we can at least all read the adverts...(for now)
Sometimes I think the most exceptional thing about the USA is exceptionalism.
Solutions to problems that are solved elsewhere are pushed back against, because "The USA is fundamentally different".
Other countries have states too. The UK even has a country with an entirely different legal system (Scots Law), but we still make our collection of income tax system simple.
A "complicated tax system" (if that is the root cause) is not something that is impossible to change. It is within the gift of the government(s) to change that.
The lack of appetite for change is the result of decades of lobbying for the status quo to continue.
A 1040 form, while intimidating looking, is trivial to fill out. Once you've done it a couple times, it takes about 5 minutes.
The only arcane bit is the law. The tax prep software knows which forms to use for which financial detail.
If the law were written clearly, there would be no need at all for any special software, you could fill out a couple csv files and send an email...
Even without the law, you are right, the actual flow of the tax prep software, for most people, is something a 16 year old could probably cobble together in an afternoon or two... however the problem then becomes how to provide a public service at low cost (to cover hosting/bandwidth costs) while govt funds are explicitly forbade to be used.
To me the solution is obvious - a third party non govt player that receives specific allotment of funding, no questions asked. However, see the rampant issues with lobbyists mentioned in the article...
It's become worse since 2017 when they changed the 1040 to make it "shorter." All they did was move everything to different forms so now it's an insane process of shuffling numbers back and forth across many forms.
"tax prep" isn't something I've had to ever think about for the UK system. I don't have to buy software, I don't have to pay anyone. I get my wage, it has my taxes taken out. That's it. I don't need to keep receipts, I don't need to work out how much mortgage interest I've paid, etc.
My individual situation is calculated, by the tax authority and rolled into a "Tax code" which acts as the personal allowance. This then feeds into payroll which pay you net of tax.
If at the end of the year, the tax authority (not you, this is automatic without a form being filled in) spots an over or under payment, they adjust your tax code for the next year to recoup or refund the difference. No cheques in the post, no forms to fill in. Just automatically happening in the background.
Meanwhile for the US, I need to fill in 2555, 1040, and other forms. These aren't "5 minutes", they're slow, and more importantly error-prone, as they get you to add up different numbers rather than just asking for the information needed.
No human should ever have to answer the series of questions ( this is legit, from the current 1040 ) :
24 Add lines 22 and 23. This is your total tax
Where Line 22 is:
22 Subtract line 21 from line 18. If zero or less, enter -0-
Line 21 is of course:
21 Add lines 19 and 20
And 18 is:
18 Add lines 16 and 17
Where 17 is:
17 Amount from Schedule 2, line 3
Where that is an entirely different form.
The only purpose I can tell for this ridiculousness is to give scope for people to make mistakes.
A form should collect raw information, not put the burden of calculation shouldn't be on the form-filler in a world where computers exist.
The data is already on the form. What purpose can that solve except opening up a possibility for someone to accidentally commit tax fraud?
You're missing the point suggesting it should be "a couple of CSV files". No, it shouldn't be any filing at all.
Demand change, demand simplification of the tax system, and demand zero-filing solutions for regular employees.
> Meanwhile for the US, I need to fill in 2555, 1040, and other forms. These aren't "5 minutes", they're slow, and more importantly error-prone, as they get you to add up different numbers rather than just asking for the information needed.
For the many forms, yes of course it takes longer. However, from the W2 to the form, if you are familiar with both, it is many steps to be sure, but the process itself doesn't take long.
I don't mean to hold up the 1040 as some shining example of how to write a form.
Merely, the steps look involved, but usually boil down to several of the same number in multiple boxes, and a couple additions/subtractions. If you do it purely by hand, there is a high chance for clerical error, yes, with automation as simple as a calculator, it's much simpler.
You usually get the 1040 as part of the "preview" of the tax prep software. When you compare the actual steps involved in the 1040 vs the overly long, overcomplicated process in the tax software, it's obvious that there is a large amount of fluff involved.
Sure, there are some credits it might remember that you might not, but that's about the only reason I would think tax prep software is better here... however this could be accomplished by something as simple as a checklist provided by the govt...and if you are paranoid you could employ a lawyer to double check that every option has been explored (how do you know the tax prep software know every credit from this current year? You don't, so, what exactly are you paying for?)
We got pre-calculated returns as an alternative in the early 90's, by the time I got my first real job in the early 00's everyone used the pre-calculated one and just made changes as necessary. The first years I got my tax return in the mail and I think a few years I had to mail back a signed copy, but these days everything is digital and if you don't have to make any changes you don't have to do anything at all.
Back then you also had to physically deliver your tax deduction card to your employer so they could deduct tax correctly, but these days that is also digital and salary systems just fetches the current deduction card before running salary jobs every month.
I know French people who live near the Swiss border and who file their tax returns in a matter of minutes because all the information is pre-filled via their employer's income statement and their bank.
They are two different countries, and Switzerland is not a member of the EU.
When French bureaucracy is simpler and more efficient than your tax collection system, you have a problem.
They were rolling out a free service over the past few years that was getting solid reviews and plenty of people used[0][1]. One of the top priorities[2] of the Trump administration and DOGE was to prevent that and it has been since shut down[3] and partly open sourced[4].
They do provide the forms, you simply fill them out. I did that every year without consulting any specialist or extra services. Much easier than in Europe. It was a 20min affair.
Tax prep software exists for people with more complicated tax situations and people who are unwilling to add and subtract a couple of numbers. The 1040 form is not complicated and anyone can use it to file their taxes for free.
> I never understood why the Revenue can't provide a set of simple online forms for tax returns like India does.
Did you read the article? The TL;DR summary is that the US government has proposed doing this in the past, but has been lobbied against it by companies that seek to profit from software to help prepare tax returns.
the UK seems to be going in this same bad direction now "As part of our journey to modernise and digitise our filing routes, all accounts must be filed using commercial software from 1 April 2027."
https://changestoukcompanylaw.campaign.gov.uk/changes-to-acc...
you used to be able to do this yourself on the gov website for free
Tell me about it! The bottom tier subscription services are also subtly crippled to make filing MTD tax returns difficult. eg. Xero's lowest tier doesn't let you easily add cash payments (without jumping through hoops for each payment).
Eh, that’s companies rather than individuals, and while it’s still objectionable it’s not quite in the same league.
If you’re running a company you probably already have an accountant, and they’re probably already using one of those pieces of software. Or you’re using something like Xero, which is already on the list.
What? I just googled, and found it is actually a real thing. Holy molly! Has Amazon become a federal system for distribution of money and goods? What next? coupons for burgers, Netflix credit?
I think its usually like a person is due to receive a $1,000 refund and the company they did their taxes through will give them the offer to immediately get an Amazon gift card for $800 instead of waiting for fed and state refunds to hit their bank accounts.
They are not as harmful as some other corporations, but for some weird reason I hate such parasites on our society much more than some bigger offenders. And I'm not even from USA :) . How do you all tolerate this?
Few people give a crap because a two figure sum for tax prep once a year is just about the smallest thorn the government and government adjacent or intertwined industries put in the side of the average person even if it's arguably less justified than some of the other ones.
I wonder why there has never been open source tax software. It seems exactly the kind of thing the community would be good at. I imagine it would be hard for very complex taxes. But for the 60% that have simple taxes, I don’t think it should be unmanageable.
Is it a matter of liability? Like I could definitely see a big issue with mistakes — even if it was just operator error.
Fast moving regulations and legislation. You need both a legal and developer team, at least to follow and implement things as soon as they become the law.
Even the revision of yearly variables is a considerable task.
> The complicated tax code keeps many lawyers and accountants in business.
At least, some of the complications in these are not intentional, but result of centuries old evolution of these systems.
Maritime shipping uses centuries old systems to handle costs in shipping accidents for example. I forgot the exact name of the system, but while the method is extremely fair, it's equally complicated. The whole premise stems from "This ship has sailed because you wanted me to carry your cargo", and becomes something mind boggling.
I'm sure there are some steps taken to keep people busy, but chalking up everything to it is unfair and wrong.
No, government builds all kinds of IT systems for a wide range of sensitive functions, and they certainly have the means to build or fund an open source tax filing system.
The reason they don’t is twofold: A) massive corporate interests lobby the government to ensure projects like this don’t happen, and B) building functional infrastructure for the people goes against certain political narratives that government is useless and wasteful. If you campaign on the idea that government is inept and wasteful, you’re not likely to support projects that undermine your platform.
It seems their business model is more existentially challenged by LLMs these days. I’m waiting for the regulations preventing AI being used for taxes and legal counsel
Taxes are actually not a bad problem for AI, because a lot of the final calculations can be easily verified/sanity checked. The AI won't be able to get away with any math errors, the issues you'll likely see are incorrect categorisation of income or suboptimal deductions. The substeps like categorisation shouldn't be too difficult to manually verify
The problem is if you need to verify everything you might as well do it yourself.
I'm not convinced an AI will ever know how to distinguish a personal and business expense from a CSV dump of your credit card too.
If you're going to go down the rabbit hole of creating a CSV, you can already parse and categorize it pretty easily without AI. I've built and have been using https://github.com/nickjj/plutus for a bit now and I've gotten quarterly taxes down to less than 10 minutes.
I agree, tax prep will probably be done by AI soon, for better or worse.
On the other hand, there's a broader business model here: lobbying to obfuscate mandatory government paperwork so that a 3rd party service is practically a requirement. It's not difficult to see AI companies expanding into that industry.
this seems to fall into the category of Intuit offering AI (RAG/MCP + tuned base model) and not people directly going to chatgpt for half-baked advice (and still needing to fill out all the forms and perform hand calculations themselves)?
Reminder: FreeTaxUSA is a great alternative, I've been using it to file my taxes the last 3 years and plan to use it if I can this year. My situation is made harder this year by my wife starting a business.
The problem is how ridiculously bloated and inefficient the US tax system is. Companies see that as a possibility for exploitation and wet their shirts with drool.
Precisely why I built https://freetofile.com (it’s a simple static site with React for internationalization that automatically renders in Spanish, Chinese, Haitian Creole, or English depending on browser settings). It’s shocking and depressing how many low income people don’t know they don’t need to spend $100-200 to file their taxes.
I want to blanket my area (well the whole country really but baby steps…) in signs with the URL during tax season. I really do loathe the entire industry at this point due to their gross practices around free filing. Some offer “free” online filing but deceptively upsell until they squeeze some money out of the customer. So I want to make any little push back I can against these companies.
Who's spending that much on their taxes? I'm not low income by any means and I've not paid a single dollar to HR Block who does my taxes every year.
My mom spends easily that much with her tax preparer who is an independent person who tries to dissuade usage of software like TurboTax. My sister spends about $100 to file, and they have simple W-2 stuff. I know several folks at my church who spend $50-$75 on TurboTax or something similar every year.
I just spent like $200 to file mine with TurboTax only because I have a very simple 1099-K/Schedule C since my wife sells things on Etsy. I know Schedule C can range from my simple setup to absolutely ridiculous, so I don't totally grudge it. But at the same time, there are a lot of small business owners where that's a big chunk of change for them.
Maybe their fee is deducted from your refund?
great job. I used to use turbotax here in canada, until i figure it out that i could just fill it somewherelse for free.
After a recent post[0] suggesting the federal tax code was already online in machine readable form, my first thought was "could I write my own US tax-filing software?" But the answer is still no.
Paying taxes doesn't mean just paying federal taxes. Users don't want free Federal taxes software if it means they'll have to re-renter all their information into different software for their State taxes -- especially when more than one state is involved, such as for people who cross state lines for work, or moved mid-year. A tax service is a massive value add.
The "free" software you get to do your federal taxes will be no threat to TurboTax until the states are required to publish their tax codes in the same machine readable format as the feds.
[0]: https://news.ycombinator.com/item?id=45599567
Except people living in one of the nine states that don't have income taxes. They're laughing all the way to the bank.
Are the sales taxes generally higher in those states, which offset the lack of income tax?
Depends on the income tax you compare with.
My state is 9%, and it kicks in at under $20K. No state has a high enough sales tax to offset that income tax.
Depends on the state, some have higher property taxes.
Higher sales tax tends to be regressive because it doesn’t tax money you don’t spend, nor does it tax things where sales tax doesn’t apply like buying assets.
Sales and/or property taxes are typically used to make up the difference. TANSTAAFL
Taxes are crazy anyhow. The government won't tell me how much I owe, but if I'm incompetent enough at figuring out the number, suddenly they both have a clear idea of what I owe and also I'm now in trouble. Why doesn't the government just tell me what I owe, and if I think they've calculated incorrectly, only then do I do my own filing or hire a CPA or whatever else?
> Why doesn't the government just tell me what I owe, and if I think they've calculated incorrectly, only then do I do my own filing or hire a CPA or whatever else?
This is how it's done in most other countries.
The tax filing industry is against it, essentially. Various attempts by the IRS to move in this direction have been stopped.
There used to be a libertarian wing that thought paying taxes should be a little painful so people wouldn't vote for more taxes, but I've not heard anyone say that since the bush era.
Why does the US have a tax prep industry in the first place?
In every other country in the world, taxes are handled by their respective financial authorities.
Why must every service and thing in the US must be a private profit making thing?
Partially there's this idea that if it the government that's in charge, you'll somehow pay more taxes.
But if it's private enterprise, their incentive is to lower your taxes as much as they can, while you pay them a small fee.
Not saying that this mentality or assumptions are good / correct, but that's basically the rationale I've heard too many times.
There's this deeply, deeply ingrained idea that the government wants to rob you blind, no mater what.
One reason is that the US tax code is horribly complicated compared to anyone else, because we have tried to enact all sorts of social policy and subsidy through the tax code, because it was somehow more politically palatable to do it that way.
Every country enacts social policy and subsidy through the tax code; the US is not special that way.
The US is special because the process of writing the tax code is corrupt. (Not uniquely corrupt, but certainly near an extreme among major countries.)
The US is also special because it has 50 states, all of which have their own thoughts about taxes.
If the government can determine that my taxes are wrong, then they know the amount I have to pay. So why can't they tell me the correct number up front? (Yes, I know the reason why, but I still feel like it's a valid question)
I've always wondered if I could file some kind of freedom of information act request to get the IRS's opinion of what my taxes should be; and/or to get the source code to the IRS's program to calculate what their opinion of my taxes should be.
---
That being said, my Dad worked for a few years at the IRS part-time before he finally retired. He loved it. (My Dad is one of those people who enjoys taxes and finds them soothing.) I concluded that the IRS is a white-collar make-work program. It also leaks a lot of confidential social information, because he got to see all kinds of tax returns from all slices of economic status.
They can determine your taxes are "fishy" and then demand further documentation. Say you declared you sold a car and profited, but seemingly under-reported the sale price. They'd show up and demand to see the bill-of-sale, maybe contact the buyer, etc. How would the government know ahead of time what price you sold the car for?
Most fraud about car sales is to claim a lower price in order to skip on sales taxes collected by the states' motor vehicle agencies. Not all states charge a sales tax on individual-to-individual sales. Here in Kentucky, the state constitution says that taxes have to be charged on the assessed value, so part of the annual registration is based on the assessed value (min $100 for boats or $200 for cars/trucks). I used to work for KY's Transportation Cabinet (combo DMV + highway dept).
>I used to work for KY's Transportation Cabinet (combo DMV + highway dept).
What magic word so I punch into the internet or who do I ask to get my hands on an old edition of those massive desk reference books that DMV clerks and their managers use to advise them on the application of the rules?
Or are they destroyed when obsolete to prevent the peasants from knowing how the sausage is made?
(yes I know the answer won't necessarily translate to other states)
I don't understand how this changes anything?
How would they know now?
These examples are silly, most people are not selling a car privately all the time and they can handle any reporting or changes when you transfer the ownership.
In many countries for the majority of the population they can and do determine how much tax should be paid, and many people don’t have to file tax returns.
Because most people don't know how simple doing their own taxes are. This is aided by a few people who have a complex situation and would have to have a real accountant do their taxes in every country.
Things that need work necessarily cost money. Someone doing the work for free is not inherently sustainable. Profits motivate work to get done all on its own. Profits by definition is money over and above expenses. So it creates a perpetual sustainable mechanism. Competition motivates quality and efficient pricing (eventually).
Lobbying corrupts this a bit. However they are not lobbying to suppress private competitors only government-run competition that has no profit motive or competition. When the government runs it we still pay for it, except now people who don’t use it also pay. Also wealthy people pay a disproportionate share as compared to their use due to progressive income tax.
In theory anyone can start a company if they have a better or more efficient product or offering and get the profits instead.
Thats the rationale in a nutshell.
The usual argument is that taxes are already paying for the collection of data and calculation of amount, so why can't we just use the figure already calculated by default? This is most true for W2 employees without any uncommon circumstances, but there would seem to be a lot of people covered under that.
It's a political challenge, not a technical one. There are constituencies that reap concentrated benefits from the current system (e.g., tax-filing services) while imposing disperse costs on everyone else. Also, there are those who believe that the IRS is out to get them, so filing your own taxes is more trustworthy than going with a government-issued pre-filled default. And that going through the motions makes the pain of paying taxes more salient, so you're more likely to complain about it.
If you look at it as a practical or technical challenge, you're addressing the wrong question.
> However they are not lobbying to suppress private competitors only government-run competition that has no profit motive or competition.
But there is a profit (or rather income generation) motive: taxation is what funds the government. Parceling this work to a private 3rd party means paying a bunch of salaries that are much higher than what government employees get paid, generating profit for the company that gets taken out of the tax revenue, which increases the cost of the service for end users or the government receiving income.
Some politicians argue that government is inept and wasteful, and sponsoring no-nonsense projects that reduce middlemen in this process interferes with that narrative. If you got into office screaming that the government is your enemy, you’re not going to support projects that make it easier for citizens to interact with the government.
The 18F team was doing remarkable work devoid of all profit motives, before it was gutted by this admin. Americans are missing out on a lot of QoL improvements based purely on the false belief that private is always better than public. In France, they're rolling out a new system where your taxes are filed fully automatically, and you get a PDF in your emails with a one page recap, telling you to only contact the admin if you feel like something is wrong with the recap.
Your take is the classic economist's "it works in practice, but does it work in theory?". Obviously tax filing works better when it's maintained by the government. You're severly underestimating the harmfulness of profiteering monopolies lobbying against any improvements and buying out the competition. Also, look at DOGE, with all the ruckus they made they just couldn't find that many inefficiencies. And for such "simple" software projects as a tax-filing platform, I just don't buy that private is better than public.
> Someone doing the work for free is not inherently sustainable
This does not apply to government / public work that has to be done anyways. Nor to any public service in general for that matter.
Land of the f(r)ee
This is the greatest comment I have seen in a very long time. Kudos.
> Why must every service and thing in the US must be a private profit making thing?
Culture
Indeed, and tbh "work must be paid for" is not necessarily a bad thing. In the Netherlands we pay for our tax-software via our taxes (and I still spend about 250 eur on an accountant to do it for me, as it takes me a whole evening as an someone with a (small) company, I'm better of writing hours), is it the most efficient? I think not, judging from how much our government spends on IT projects that fail. There are a lot of hidden costs.
That said, the lobbying is really bad of course, probably also prevents cheaper or FOSS alternatives.
Citation needed.
In Germany tax-prep industry is huge, there is a huge network of tax consultants plus paid online services like taxfix and smartsteuer.
The only countries I lived which didn't require you to declare the taxes were Russia and Georgia, mostly because 13% and 20% flat tax rate respectively.
Any country which does have complicated progressive tax system would require you to declare taxes at least at some cases.
Germany has ELSTER, which is a free government provided online service. I use it every year to fill in my tax declaration. It's not perfect but it works pretty good. Not so friendly for expats since it doesn't have internationalisation, so you need to know a bit of german (I use G translate).
ELSTER is available but it is extremely complicated to use. Not even my Tax advisor uses it directly. You must be the first person I’ve heard that uses it directly.
For me not worth to use it having extremely good tools like the offering from WISO.
In my opinion a complicated tax law is a direct attack from the State against low and middle income population. If you have low income and poor education you will not be able to make use of the tax law to increase your available income, something that high income citizens do daily.
In this case we have to thank the free market to provide really easy tools for less than €30 so middle and low income citizens can start at least to take advantage of the tax law.
I’ve lived in multiple countries and always did my tax report myself. And the German situation is so blatantly designed, compared to other countries, to benefit only a very small portion of the population.
Not only that, If the amount of man/hours that the whole country of Germany spends doing taxes would be spent on productivity gains or just normal work, the country would become immediately the richest country in the world. Instead, it’s just wasted effort and work.
I’ve used Elster to file my German taxes until I left the country. Very common to use that software directly. Probably not much fun though if one’s situation isn’t straight forward.
What does your Tax advisor use, post mail?
"extremely complicated to use" well, that is something that you hear often from Tax advisors or tools for less than €30. Same FUD tactics.
There is a world of difference between not having to declare taxes, and having an industry of tax filers.
In France you have to declare taxes, but everything known to the tax authorities is pre-filled, leaving you to add any special incomes/deductions that didn't come trough regular channels that get automatically reported.
You still have tax consultants to help you optimise if there are higher revenues, but it's a very niche service.
The IRS actually knows everything, too. They just make you tell them what they already know.
They helpfully send you letter when you screwed up, too.
Germany, as a de-facto vassal state of the US, is the exception that confirms the rule. This is an observation that comes from almost a lifetime of living in this region of our world.
You can do taxes yourself for free most of the time. Millions of us do every year. The IRS estimates that 70% of tax payers could file for free.
> Why must every service and thing in the US must be a private profit making thing?
It isn't. There are roughly 2 million nonprofits. "Nonprofit organizations play a significant role in the US economy. In 2022, there were 1.97 million nonprofits operating in the US"
And there are endless government programs and millions of government employees. The federal government alone spends over $6 trillion of our money, and money we don't have, per year, and most of it is on mandatory social programs.
"About 60% of all federal spending is categorized as mandatory spending — which amounted to $3.8 trillion last year. This spending is essentially on autopilot because it funds programs whose eligibility rules and benefit formulas are set in law. This consists mostly of programs like Social Security, Medicare, Medicaid and Veterans care."
https://usafacts.org/just-the-facts/budget/
Should the US employ enough people to file 160 million tax returns each year? (Just individuals not corporations)
The tax code is a behemoth. Plenty of loopholes to find to save money.
Also, most of the tax prep companies are thinly disguised payday loan companies.
I think the point is that the vast majority of people don't really have a unique tax situation. And all the data already exists. There's just no framework set up to allow this to be automated like there is in other countries.
It should be the case that all your basic taxes get calculated for you and taken at the point you're paid by your employer. Anything exceptional should be able to be claimed back via a web portal somewhere.
So it's not like 160m tax returns NEED to be filed. That's just how it is today.
There are a lot less loop holes than in the past. In the 1950s taxes on the rich were 90% - but there were so many loopholes the rich in reality paid a similar tax rate to their peers today where the tax rates are lower, but there are also less loopholes.
In the 1950s the common person couldn't take advantage of most loopholes (I'm not old enough to remember, but I'd guess mortgage interest was the only useful one, the rest where $100 here and there but it never added up to much for the common person)
Yeah they should.
Can’t you file your taxes for free in the US if you know how?
Yes, you can download the form 1040 and fill it by yourself, you'd need a few Schedules attached. They all have instructions available online, your work has to send you a copy of everything they paid you and into the IRS (regular jobs always err on the side of overpaying), and while it is not hard, it definitely looks intimidating and takes time to understand, especially the deductions.
You can also just not file your taxes, if you don't owe anything (and as I said, jobs always err on the side of overpaying) they won't bother you, but most people end up eligible for the tax refund, so it is more beneficial to pay for that service.
Sad part is, when I started working, this was normal. My father showed me how to do it. I did it for a few years and then TurboTax came along and I used that for free. Then they rug pulled me into a deluxe one year because I had 1099 income and ever since I’ve been jailed into paying if I want to use them. 1099 or not.
I used to do that every year. It wasn't hard. However one year I forgot to copy line 12b from form 9876 to line 34c of form 5432 and when the IRS caught that I had a big mess to clean up (since state taxes copy federal taxes so I had to refile state with the corrected numbers...). Now I just pay a small fee to FreeTaxUSA (I figure they deserve some money for their efforts in creating software).
One thing I can say for sure: doing taxes with a computer takes me longer than filling out the paper forms by hand! There are so many delays while "calculated" (as if a ghz computer can't add numbers fast), and loading question pages that I can obviously skip (I never worked for the rail road, I'm not blind...) but take extra time because of how they setup the UI.
Switch to freetax USA. I have 1099 income and it's still free.
Besides the point. The point I was making is that because I had one year of 1099 income in the past, I was paywalled into paying. I no longer use TurboTax as my tax needs have changed. Thanks though but I wasn’t soliciting for alternatives.
I have done this a few times, but for me it takes several hours and I always am worried I have made a mistake. If you have simple investments you can still run into confusing things that are very hard to follow.
> You can also just not file your taxes, if you don't owe anything (and as I said, jobs always err on the side of overpaying) they won't bother you
From the IRS website:
>Who must file >Most U.S. citizens or permanent residents who work in the U.S. have to file a tax return. >Generally, you need to file if: > Your income is over the filing requirement > You have over $400 in net earnings from self-employment (side jobs or other independent work) > You had other situations that require you to file
Not sure if your intent was to discourage filing, but it read that way to me.
That's why GP said "tax prep". Anyone can download and submit a 1040. That isn't the part that takes domain expertise.
I don’t know why assume that in every country in the world that is free. In my European country until 15 years ago or so you had to hire someone to do your taxes for you, and currently the free method only works for the most simple tax filing. In fact what you get is called a “draft” of your tax filings because you’re supposed to make sure it’s okay, and it’s your responsibility if you miss something or if the draft is wrong.
And obviously the draft usually assumes that you will have to pay more tax, since there’s a perverse incentive given it’s the government who fills it for you.
Yip, consider how much money banks make by injecting themselves between you and the reserve bank.
This is a very different situation. If you're interested, I'd recommend reading Can't We Print More Money by staff at the Bank of England (https://www.amazon.co.uk/Cant-Just-Print-More-Money/dp/18479...).
The short answer is central banks are not setup to offer services directly to the public.
This is different to the tax office in that people already need to interact directly with it! Anyone in the UK can fill out a Self Assessment, for example, however it's optional for almost everyone, because Pay As You Earn takes the tax off your employer instead.
No other countries have tax prep services?
In my country, all my tax is deducted from my salary before reaching to me.
For other things, I can go to a "Virtual Tax Office" with my browser or my mobile banking application and pay with cash or credit card, sometimes with zero interest installments, even.
This is exactly how it works in the US, too.
The reason this topic continually comes up is that people in the US are stupid and bad at math, and the IRS is very heavy-handed and issues penalties for minor tax errors, so people are afraid to interact with the process without a trusted intermediary.
I mean, I don't file anything. For my car tax, I go to the site, enter my license plate, and a couple of other details, and the number shows up.
I enter my credit card number, and pay. That's all.
Same for other stuff like housing tax, too.
Most countries use some sort of PAYE system, so the average person will need to do little or nothing on tax.
Yes, and this includes the US!
When people say they are “paying their taxes”, really what they’re doing is checking whether the automatic tax deduction out of each paycheck was properly calculated over the whole year, and whether any special circumstances make them eligible for a refund (or whether they’ve had other income they need to pay tax on).
Every country I've ever lived in you had to prep and submit your own taxes. Never heard of that system.
If you happen to be an entrepreneur, a foreigner (relative to the country of work), or an American citizen (despite holding the citizenship you're on, thanks FATCA!), then, yeah, I can see why you have never encountered the simpler arrangements.
If you're an ordinary citizen of most countries and work under a company, the company is obliged to track it for you. What you get is a very simplified form asking if you have more income sources than from your work, and the local tax system means that most of them legally do not have any (for example, banks collect the taxes for the interest you have received, not the arcane American system where you're the one responsible for that).
> a foreigner (relative to the country of work)
In a PAYE system, merely being a foreigner isn't _usually_ an issue, provided that you're domiciled and don't have foreign income. The exception, as you mention, would be a US citizen; the US's approach to foreign income of its citizens is sufficiently weird that they'll generally have annoying tax situations.
> What you get is a very simplified form asking if you have more income sources than from your work, and the local tax system means that most of them legally do not have any
If even that. In Ireland, and I believe the UK, you only have to fill out that form if you actually _do_ have non-employment income which is not deducted at source. Most peoples' only interaction with Irish Revenue would be to claim tax credits on rent/mortgage/medical expenditure/whatever.
> Why must every service and thing in the US must be a private profit making thing?
This is a side-effect of the Protestant Work Ethic. Weber coined the term in 1905 as a way to explain why the Northern European countries (who were predominantly Protestants) were wealthy while the Southern European countries (who were predominantly Catholic) were poor. Prior to the election of JFK as US President, anti-Catholic sentiments were widespread throughout the US (which explains why Irish & Italians were not considered "white" until the early 20th Century). Even today, many Evangelicals do not consider Catholics to be Christians.
> Calvin taught that all men must work, even the rich, because to work was the will of God. It was the duty of men to serve as God's instruments here on earth, to reshape the world in the fashion of the Kingdom of God, and to become a part of the continuing process of His creation (Braude, 1975). Men were not to lust after wealth, possessions, or easy living, but were to reinvest the profits of their labor into financing further ventures. Earnings were thus to be reinvested over and over again, ad infinitum, or to the end of time (Lipset, 1990). Using profits to help others rise from a lessor level of subsistence violated God's will since persons could only demonstrate that they were among the Elect through their own labor (Lipset, 1990).
> Selection of an occupation and pursuing it to achieve the greatest profit possible was considered by Calvinists to be a religious duty. Not only condoning, but encouraging the pursuit of unlimited profit was a radical departure from the Christian beliefs of the middle ages. In addition, unlike Luther, Calvin considered it appropriate to seek an occupation which would provide the greatest earnings possible. If that meant abandoning the family trade or profession, the change was not only allowed, but it was considered to be one's religious duty (Tilgher, 1930).
These 2 paragraphs also explain why many in the US have such an utter hatred for any sort of social safety net for poor people - those people are damned in the Biblical sense and therefore it is a sin to give them any sort of money, food or healthcare.
[0] - https://en.wikipedia.org/wiki/Protestant_work_ethic
[1] - History of it: http://workethic.coe.uga.edu/hpro.html
[2] - https://en.wikipedia.org/wiki/Anti-Catholicism_in_the_United...
Private, profit-making things are willing & able to "generously support" the politicians who enable their business models.
Vs. public services and public servants? Not so much.
The tax preparation industry exists in much of the world.
Taxes are simple if you live in one place and only receive income from your employer. If you have multiple sources of income, connections to multiple countries, etc., things can get very complicated very fast. That's why the tax prep industry exists - and not just in the US.
That being said, the Internal Revenue Service could prepare the taxes of most Americans. A simple system of, "Here's what we think you owe, based on the information we have on hand - sign and submit if you agree" would work for most people.
> the Internal Revenue Service could prepare the taxes of most Americans
IRS Direct File[1] did exactly this. It apparently worked really well, and people liked using it, netting ~$20 billion in savings to the Americans that used it (roughly half of that came out of the pockets of the tax-prep industry).
Then, DOGE got to it and the new administration's IRS commissioner killed the program.
1 - https://en.wikipedia.org/wiki/IRS_Direct_File
In Australia, if you work in multiple places and at multiple companies, it’s still trivial to file your own taxes. You log in to the government portal, where the collected amounts of tax from each income source, including bank interest, is listed. It can get more complicated if you have your own business but for the majority of people it’s easy and doesn’t require a third party.
Australia has a progressive tax structure, right? If you have multiple income sources how does each source know the proper withholdings? How do they know what deductions you'll be eligible for or are wanting to take?
I don't understand how these could be issues. They aren't in my country.
You're still responsible.
Tell each company how much to withhold.
If they take too much, you get it back when you file taxes.
If they don't take enough, you pay a penalty for having too large of a bill when you file.
The issues you mention exist regardless of how many employers you have, because you can have income that does not come from an employer (e.g. stock dividends).
If it works anything like what we've got in Norway, they take a rough percentage, and once every year when the taxes are filed, the IRS equivalent charges or repays the missing amount.
In the UK you get a code based on last year’s earnings, which the company uses to set a flat rate of withholding on each paycheck. If there’s any discrepancy that usually just feeds into next year’s code.
In Australia, you probably need to tell the companies about the other income sources, and they will attempt to withhold at the appropriate rate. Then at the end of financial year, you go to your pre-filled online tax return which has all the figures reported by each company you work for already present and sums up whether there’s a refund or payment due. This is also where you enter any deductions.
> A simple system of, "Here's what we think you owe, based on the information we have on hand - sign and submit if you agree" would work for most people.
They already do that -- if you calculate your taxes wrong, they will send the adjustment (they will do it both ways, pay you back or ask for the remainder). I guess they might not be aware of all the deductions, but standard deduction beats itemized one for the majority, so they can 100% automate this whole process if they decide to. For complex cases and businesses, sure, you are on your own, but at least most W2 should be covered.
Yes, but tax filers have potential civil and criminal liability risk if they make a mistake.
Presumably much less if one pays more than the IRS calculates is owed.
Essentially both the IRS and tax filers verify correctness of the tax filer's return and the tax filer can be prosecuted if they make a mistake according to the IRS.
> Yes, but tax filers have potential civil and criminal liability risk if they make a mistake.
How is this an issue? Why would it be different under another system?
I see you posting a lot of what I think are pro-tax-prep messages but they don't seem to have any substance. Please try to take them to the conclusion of an argument. (That is, finish by connecting the facts you are posting with some assertion about the desirability of the current system, or some assertion the parent has made.)
Apologies.
What I mean to highlight is that although a mistake in filing may lead to the IRS rectifying the mistake by sending/requesting the error balance, there are other possible effects, including civil and criminal liabilities.
This is undesirable. As mentioned in many comments here, the vast majority of filers, especially those with one employer and no substantial investment income, should not be required to file their taxes and instead the IRS should communicate the calculation result and ask if the filer disagrees.
This is a classic problem related to the "you slice, I choose" false dichotomy[0]. Essentially, even assuming it costs zero time to fill out and file a tax return, any mistake at all could lead to a negative consequence to filer.
As an aside, always choose to choose and not to cut the cake :)
[0] https://en.wikipedia.org/wiki/Fair_cake-cutting
Right, when the Europeans say the tax is paid as you earn and the authorities let you file differences free and easily, they mean the vast majority of tax payers. It is rare to be the exception.
Whereas I guess American Exceptionism (tm) means you all have to pay a rent seeking company to file taxes…?
That only works if all of your income comes from your employer, and is thus reported directly to the financial authorities and subject to withholding.
It is not that rare at all for Europeans to have other sources of income, and thus to have to file their own taxes.
In Ireland, and I think many other countries, if you have under 6k non-employment income, it’s ~trivial; you fill in a form on the website. It only gets complicated over that (though you would still typically do it all online; the form just gets _a lot_ scarier)
As an European with multiple sources of income, all that boils down to is literally excel style fill in the boxes deal. There's even free tools that can handle the simple formulas if I don't trust my calculator enough. 1 hour a year at absolute worst; definitely no space for a finacial parasite to latch onto.
Yes, and what do you think it is like in the US? It works exactly the same way.
You have a very simple tax situation. Many people do not.
In the US, if you just have wage/salary income and an investment account, and you lived the entire year in one state, your taxes are also very simple. You can fill everything out yourself in one evening, or pay $100 to do it with tax preparation software.
But things can rapidly get complicated. Did you move from one state to another during the year? Do you live in one state but work for an employer in a different state? Are there any credits or deductions you're eligible for? Or god forbid you live abroad, at which point you're dealing with double-taxation treaties and the like.
> "Here's what we think you owe, based on the information we have on hand - sign and submit if you agree"
That implies the government would know significantly more about my life and my day to day affairs. That sounds like it would be a privacy nightmare.
No, they would know exactly what they know now. Employers already report your earnings to both the federal and state IRS agencies and pay your withholdings automatically adjusted for your dependencies. So a simple form that says you made X and claimed Y dependencies. Click submit to confirm…
That would be simple enough for most people (1 job, 1 home, maybe some kids) and it doesn’t require the government to know anything additional.
In that most common scenario no tax accounting service should be needed. Honestly a 1040 isn’t that complicated in that scenario either, but is still too difficult for a good number of people and it’s just unnecessary.
There is so much more to filing taxes than earnings. Yes, if all I had was a W-2 this would be trivial.
And if all you have is a W-2 you don't experience most of the complexity of filing as it stands now anyway.
How exactly? Currently, you report your earnings, your employers report what they've paid you, and banks report specific transactions. How does simplifying/eliminating the deduction process (which is all that an accountant is doing) give the government more info about you?
This one government agency would need to know the superset of everything about you that could possibly be reported on any tax form. The simple case breaks down quickly. If taxes were redesigned to become overall much simpler, then sure, the reporting could be much simpler and more passive for the filer.
Businesses paying people already file copies of the W-2s and 1099s that they send to their employees with the IRS, meaning that, for a very large chunk of Americans, the IRS already knows everything needed to fill out their tax forms.
Having lived in both the US and several European countries, America is already the privacy nightmare because all your data is with corporations who can do absolutely anything with it. European-style effortless automatic tax filing certainly wouldn’t make it any worse.
(Also it’s rather ironic that people who think like you have been voting for the party which is currently enabling Palantir to build Chinese-style surveillance in America. But as long as the data is owned by billionaires and they promise to only use it against the “others”, I guess it’s fine.)
In the UK, for example, if you are a simple case (PAYE employee, no other sources of income) they just do it, you never interact with HMRC at all in the ordinary procession of things. You may get a yearly summary form (P60) but that's about it.
Here in Australia everyone must fill in an annual return, but it’s a fairly well automated online system and they’re probably already already have most of the fields filled in, you just need to add anything more complicated or any deductions you think you’re owed.
In both systems you can have an accountant file for you, or use other software, but you don't need to and most British people will never file a single return in their lives.
wait until you hear about our healthcare middlemen.
I never understood why the Revenue can't provide a set of simple online forms for tax returns like India does. Heck, India provided Excel sheets with VBA script for many years, that produced an XML which can be submitted as tax filing. Tax filing is now a 15-minute affair for a salary-only income in India.
The complexity is a feature not a bug. If you have more complexity, you have more opportunities for loopholes. Those loopholes are currently used by those wealthy enough to hire creative firms to help them get through them and minimize owed taxes
If there’s one outcome I really hope from AI automating work, it’s taking away the advantage the monied class has in this regard. Then perhaps there’s less purpose for the complexity
Maybe the AI will create a level playing field and make the tax prep / loophole industry collapse.
Or maybe the free models will start responding with
""" It looks like you're asking for help with tax preparation. I recommend our designated AI tax service [link to service that asks you to upgrade your plan or pay a one-time fee]. """
They are operating free models at a loss now, but at some point they are going to have to turn a profit. At that point tax prep becomes a revenue stream for AI as well.
Using AI to do your taxes seems like a quick way to get into a bunch of trouble.
Not if the IRS verifies using the same AI. Actually, it’s probably twice the trouble.
>Actually, it’s probably twice the trouble.
Plus interest and fees (they can't call them fines because then you'd have rights), so call it triple to be safe.
Please don't allow a computer to guess, one token at a time, what you tax liability is or how to fill out the forms properly.
Much of the complexity is to close loopholes. Many things in the tax code start out fairly simple, then people find ways to use them in ways that were not intended, and then the simple thing becomes complex as additional rules are added to try to fix that. This can iterate and what started out as a couple of sentences that most people knew what they intended becomes a few pages of convoluted rules.
They could still live side by side. You could still have a system where you have simplified filing where for 99.99% of the people you can just pretty much fill in one or two fields of what you made and something like that and even maybe get this data directly from the employers. That's how it works in Sweden. And then for the people who have complicated business, you could have a more complicated form where you need to hire a lawyer or accountant to do it. This is just assuming you don't care about whether or not there are loopholes for people. Like that's a political decision maybe more, because I guess the people defending them would say that there are good reasons they exist and you know wealth creation and so on. But it makes no sense to make it so complicated for people who have very simple lives where they have one employer who is paying them a salary and that's it.
My entire life (in the US) there has been the idea floated that our tax code should be simplified to the point where filing can be done on something the size of a postcard.
We absolutely could do that, but the government has no incentive to do so. At least in the US, taxes are a form of control, a source of power for those in charge, a political chip for elections, and a mechanism to further the wealth divide. Taxes are not primarily meant to fund our government, and definitely don't include goals related to making the average person's life easier.
This is incorrect: the wealthy don't use loop holes. They use incentives explicitly enumerated in the tax code.
What else is an incentive for, but that the government wants you to use it?
Hell, Google got pre-approval from the IRS for their Dutch Sandwich tax structure.
Most poor people don't read the tax code. They should.
Most poor people don't read*
They should.
Of course, this is not to say they always are stupid or illiterate, it's again usually just another form of exploitation, they don't have (or feel they don't) time to read it.
Which is arguably explicit exploitation/enslavement - the Walmart door greeter doesn't have a difficult job, however their role doesn't allow them to do anything that would benefit themselves. I wouldn't care if they were reading their phones or a book, but noo... can't have the peasants educating themselves.
And they aren't paid enough, so when they return home, they likely don't have any time after needing to perform meal prep, taking a second job, etc.
The USA is a third world country in many respects.
~ Kerry Packer, before House of Reps Select Committee on Print Media, November 1991.
( https://www.youtube.com/watch?v=e97kq2XflKE )
It's still largely maximising what can be pushed through unintended loopholes.
>The complexity is a feature not a bug. If you have more complexity, you have more opportunities for loopholes. Those loopholes are currently used by those wealthy enough to hire creative firms to help you get through them
Agreed that the complexity is a feature but it's not for the rich ( though the rich will take advantage of it, and why not? ) . It's mostly for the powers that be. If there were a 'flat' tax ( and one could argue what constitutes a flat tax) the rich will be more willing to pay that flat tax.
I'd say complexity support a very large govt, keeping several people employed including accountants, tax software companies etc. It serves the parasite class.
> If there were a 'flat' tax [...] the rich will be more willing to pay
That's just because moving from progressive-taxation to a flat-tax reduces how much they pay!
The "simplicity" of the math done by their usual accounting firm that does their taxes for them is irrelevant by comparison.
_________
To illustrate why the burden shifts, suppose the nation of Elbonia needs a constant $540 to operate, and it moves from a progressive tax to a flat tax.
It should be no surprise that most of the Elbonian nobles are "willing" to see that change happen. Meanwhile, the peasants that are already living paycheck-to-paycheck have to plan how to cut back on luxuries like keeping their teeth.It's worth pointing out that the Treasury takes in tax revenues throughout the year. The sources of that income are:
50% Payroll Income Tax. 35% Social Security Taxes. 7% Business Taxes. 7% Excise Taxes.
70 years ago they were:
25% Payroll Income Tax. 25% Social Security Taxes. 25% Business Taxes. 25% Excise Taxes.
I think the priority is fixing this distribution to levels which were historically perceived as being more fair. The wealthy are one problem. The oversized corporations are the everlasting machine which drives them.
Excise taxes are effectively sales tax but only on specific products. This is less economically efficient than broad-based taxes unless the thing you're taxing is something you're specifically trying to discourage (e.g. cigarettes) rather than having the purpose of generating revenue, but since 1955 the government has become more inclined to ban things it doesn't like than tax them.
In a global economy higher business taxes just cause large international corporations to incorporate in a different jurisdiction, which gives them an advantage over smaller purely domestic corporations, which is bad.
Social Security is already taking in less money than it's paying out. Reducing the Social Security tax would imply reducing Social Security benefits, since that's where it goes, unless you're proposing a more significant reform of the system in general.
The size of corporations and the amount they're taxed are two entirely different things. Indeed, the tax code does a lot of things to encourage corporations to be larger, like taxing dividends and capital gains after corporate income has already been taxed, which creates a tax preference for leaving the money inside of an existing corporation rather than investing it in starting a new competitor.
To get accurate numbers you need to scale either the before or after numbers to reflect changes in the effective overall tax rate over the time period.
You also need to look at overall tax burden, not just federal. It used to be that the states levied taxes and did stuff. Now mostly what happens is that the feds levy taxes and piss it back onto the states in the form of grants to do qualifying stuff.
IDK how this distorts the percentages but it certainly does.
Another issue is that super wealthy folks don't get their money from regular wages. They borrow money from banks using their assets (e.g., stocks) as collateral. They pay back the loan at relatively low rates. The borrowed money is not taxable income.
>That's just because moving from progressive-taxation to a flat-tax reduces how much they pay!
They would be more than willing to be flat taxed at their current rate because it would still save them the hassle and the stress and the uncertainty.
Now, it would likely reduce what they pay eventually, because if you flat taxed the whole populous at their rate there'd be a new government pretty quick, but that's not the point.
> That's just because moving from progressive-taxation to a flat-tax reduces how much they pay!
That's what everybody says but then you look at effective tax rates in real life and the highest ones are paid by people like doctors rather than billionaires because the complicated system is the thing that allows the billionaires to pay less.
Meanwhile you don't need a complicated marginal rate system to get a progressive effective rate curve. Just give everybody a tax credit in a fixed amount and then use the same rate for everyone. Here's your table when you do that:
These numbers, of course, assume that as in your example you need the average effective rate (by earnings) to be 30%. By comparison, for example, US federal receipts as a percent of GDP have been stable at ~17% of GDP since the end of WWII (and were dramatically lower before that). Your numbers would be more in line with what would happen if both federal and all state taxes (including e.g. property tax) were replaced with this system.> people like doctors rather than billionaires
That's not a progressive-tax brackets versus flat-tax thing.
That's a "having different rules for different ways of making money" thing.
> the complicated system is the thing that allows the billionaires to pay less
Something true of a parts is not necessarily true of the whole, and vice-versa. The reason billionaires pay less than we might expect comes from relatively simple factors, not because the tax-code is too complex for poor people to get the same result.
> That's a "having different rules for different ways of making money" thing.
That's the thing which is a consequence of the existing complexity, which in turn is a consequence of trying to do brackets by income.
A flat rate tax is you collect VAT on everything no exceptions, send everyone a check in a fixed amount as the credit to make it progressive no exceptions, and you're done.
Different marginal rates is oops, if you use VAT then rich people have poor people go to the store for them so you have to use income tax and track everybody's income. But some people get income from investments and then it's not realized until they cash out, which allows a bunch of fancy tax dodges, but trying to tax unrealized gains has a bunch of other serious problems like liquidity and valuation. Also, you didn't really mean to tax everyone's retirement savings, so now you need a bunch of stuff like 401(k) to undo the thing you didn't really mean to do, and now you have some more complexity. And it continues like this until you turn around and doctors are paying higher taxes than billionaires because billionaires have more resources to navigate all the complexity.
The tax brackets are not what make taxes complicated. Knowing how to categorize different types of income is what makes taxes complicated.
The flat tax would not make tax preparation any bit easier. They only thing it would do would be to eliminate progressive taxation. In other words, the rich would pay less. The poor would pay more.
> The flat tax would not make tax preparation any bit easier.
This is absolutely not true in the USA. Income from different sources is taxed differently.
Example: The forms distinguish between short term capital gains, long term capital gains, and e.g., income from government bonds is taxed differently at lower levels of government.
This is exactly correct. That said, I'm quite surprised how many people struggle to understand how progressive tax bands/brackets work. It maybe doesn't help that the (right wing) media often portray them dishonestly (i.e. claiming that a 50% tax band starting at $100k/year means you would pay $50k/year in tax if you earn $100k/year)
AI will increase the complexity even more
It's so easy that one man creates an Excel 1040 every year. See https://sites.google.com/view/incometaxspreadsheet/home
The UK has online forms for this, even for businesses, but is moving away from this as part of "Making Tax Digital" - i.e. they are axing paper forms to doing away with the online equivalents as well.
Then again, most people here who have salary only income do not have to fill in a tax return at all - only if they have certain types of income (self-employment, capital gains or investment income) above a threshold.
I've been doing Self Assessment for 25 years. In the first few years it was fill in a colourful paper form which won awards for clear English etc. Nowadays it is online with many details pre-filled in. At the end you can download a .pdf that looks exactly like the paper form or not bother.
That's for personal tax returns. For businesses, the new MTD stuff is all through commercial partners.
Something like ~40% of US individual taxpayers only need to file a form 1040 [1] for their federal tax return.
Another large group will need that plus a small number of other forms, most of which will be easy to fill. For example if they are getting a tax credit to help with health insurance costs there is form for that. That one's easy to fill out because you will be mailed a report that contains the information needed for the form. The report is in a standard format, and the instructions will be of the form copy line X form the report to line Y of the form.
If your income is just salary plus some investment income from investments like mutual funds you don't have enough deductions to be worth itemizing [2], it generally is pretty straightforward.
[1] https://www.irs.gov/pub/irs-pdf/f1040.pdf
[2] In the US you have a choice between "itemizing" your deductions, which means you have to list all of them, or taking the "standard" deduction, which is around $15k for a single person and around $30k for a married couple. Around 90% of people take the standard deduction.
The tax system in the US is complicated, you've got different state taxes as well as the federal, for example if your kids go to a different state for school than you live, add that your partner might work in another state, maybe they have different relief taxes for disasters through the year. It might very well be a feature but it is complicated, and the more activities you have, maybe investments, a small business, multiple jobs. It becomes overwhelming for non accountants.
Sure, but what about the >95% of the population which doesn't fall under weird edge cases?
Why doesn't the US provide a free 10-minute online wizard for them, like plenty of other countries are already doing?
Even the complex cases fit into an overarching tool. Most people in the UK don't submit tax returns because they don't have any income beyond their salary. Even if you do, you then use the tool which asks you a series of questions like "do you have a student loan?" and "did you receive any dividend income?", then you have to fill in some next level detail if those are true. I'm sure there are people with weird tax arrangements that need to work outside of the wizard, but I'd wager it was less than 1 in 1000, and those people tend to have the money to pay for fancy accountants to do it for them.
You also only need to fill in a tax return if you have income (or capital gains) above a threshold. SO having some interest paid on a savings account etc or a small side business or selling an asset at a small profit above what you paid for it does not mean you have to make a tax return.
I'm not sure how it is in the US, but in Canada a huge amount of low-income benefits are directly tied to filing your taxes. Most Canadians experienced this in our college years when we got GST (our VAT) refunds due to being low-income adults.
Canada recently announced that they're going to go for automated tax filing and it turns out the biggest cost may not be implementing it, but that they'd end up having to pay out a lot more in benefits to low income people that don't file.
To be clear, i was talking about the UK.
> Most Canadians experienced this in our college years when we got GST (our VAT) refunds due to being low-income adults.
VAT refunds for people on low incomes is something we have in the UK. I think we should!
This is true for some European countries too. No tax filing is needed for salary only income. I don't remember when I filed my taxes last time.
Basically I only do mine in about 15 minutes, most spend on verifying what I actually paid for things. Because I go over of the basic deduction so I can deduct for workspace, internet and electronic equipment. But the workspace is going away so probably won't bother after this year.
Everything else is fully automatic.
This program was called IRS Direct File[1], and DOGE/the current administration killed it.
1 - https://en.wikipedia.org/wiki/IRS_Direct_File
Because it is (or was it the time this article was written) against the law. The company that owned the tax preparation software lobby to Congress to pass a law requiring that the IRS not provide a free and easy way for people to submit their taxes.
Many other countries also have complicated taxes and are able to provide a better user example to non accountants. The US isn’t special.
This american exceptionalism is such a meme. You aren't special.
The propaganda must be pretty special to have you so convinced though.
It's a combination of diet and education.
If you want to understand the first, take McDonalds - you probably have one and don't think it's that bad? Imagine everything on the menu is either 10 times sweeter (sickening), or made with wilted products on the cusp of expiration, and that's "standard" food.
It's so bad, many Americans hate anything "healthy" because any time they are exposed to it, it's not much better than pigs swill. So there are many who will only eat meat, because that is harder to make taste poorly, despite being even more disease riddled (there are almost no standards for meat inspection).
So then, you are constantly sick, low energy.
And then education - suffice it to say there are many communities where it is seen as "reasonable" to believe in nonsense like "flat earth", and many struggle with basic things like addition. It's a wonder we aren't illiterate too... I suppose it's too useful to be able to read about products to buy them, so we can at least all read the adverts...(for now)
Many other countries have figured this out since the early 2000s, the US could do it as well if they wanted to.
Sometimes I think the most exceptional thing about the USA is exceptionalism.
Solutions to problems that are solved elsewhere are pushed back against, because "The USA is fundamentally different".
Other countries have states too. The UK even has a country with an entirely different legal system (Scots Law), but we still make our collection of income tax system simple.
A "complicated tax system" (if that is the root cause) is not something that is impossible to change. It is within the gift of the government(s) to change that.
The lack of appetite for change is the result of decades of lobbying for the status quo to continue.
A 1040 form, while intimidating looking, is trivial to fill out. Once you've done it a couple times, it takes about 5 minutes.
The only arcane bit is the law. The tax prep software knows which forms to use for which financial detail.
If the law were written clearly, there would be no need at all for any special software, you could fill out a couple csv files and send an email...
Even without the law, you are right, the actual flow of the tax prep software, for most people, is something a 16 year old could probably cobble together in an afternoon or two... however the problem then becomes how to provide a public service at low cost (to cover hosting/bandwidth costs) while govt funds are explicitly forbade to be used.
To me the solution is obvious - a third party non govt player that receives specific allotment of funding, no questions asked. However, see the rampant issues with lobbyists mentioned in the article...
It's become worse since 2017 when they changed the 1040 to make it "shorter." All they did was move everything to different forms so now it's an insane process of shuffling numbers back and forth across many forms.
"tax prep" isn't something I've had to ever think about for the UK system. I don't have to buy software, I don't have to pay anyone. I get my wage, it has my taxes taken out. That's it. I don't need to keep receipts, I don't need to work out how much mortgage interest I've paid, etc.
My individual situation is calculated, by the tax authority and rolled into a "Tax code" which acts as the personal allowance. This then feeds into payroll which pay you net of tax.
If at the end of the year, the tax authority (not you, this is automatic without a form being filled in) spots an over or under payment, they adjust your tax code for the next year to recoup or refund the difference. No cheques in the post, no forms to fill in. Just automatically happening in the background.
Meanwhile for the US, I need to fill in 2555, 1040, and other forms. These aren't "5 minutes", they're slow, and more importantly error-prone, as they get you to add up different numbers rather than just asking for the information needed.
No human should ever have to answer the series of questions ( this is legit, from the current 1040 ) :
Where Line 22 is: Line 21 is of course: And 18 is: Where 17 is: Where that is an entirely different form.The only purpose I can tell for this ridiculousness is to give scope for people to make mistakes.
A form should collect raw information, not put the burden of calculation shouldn't be on the form-filler in a world where computers exist.
The data is already on the form. What purpose can that solve except opening up a possibility for someone to accidentally commit tax fraud?
You're missing the point suggesting it should be "a couple of CSV files". No, it shouldn't be any filing at all.
Demand change, demand simplification of the tax system, and demand zero-filing solutions for regular employees.
> Meanwhile for the US, I need to fill in 2555, 1040, and other forms. These aren't "5 minutes", they're slow, and more importantly error-prone, as they get you to add up different numbers rather than just asking for the information needed.
For the many forms, yes of course it takes longer. However, from the W2 to the form, if you are familiar with both, it is many steps to be sure, but the process itself doesn't take long.
I don't mean to hold up the 1040 as some shining example of how to write a form.
Merely, the steps look involved, but usually boil down to several of the same number in multiple boxes, and a couple additions/subtractions. If you do it purely by hand, there is a high chance for clerical error, yes, with automation as simple as a calculator, it's much simpler.
You usually get the 1040 as part of the "preview" of the tax prep software. When you compare the actual steps involved in the 1040 vs the overly long, overcomplicated process in the tax software, it's obvious that there is a large amount of fluff involved.
Sure, there are some credits it might remember that you might not, but that's about the only reason I would think tax prep software is better here... however this could be accomplished by something as simple as a checklist provided by the govt...and if you are paranoid you could employ a lawyer to double check that every option has been explored (how do you know the tax prep software know every credit from this current year? You don't, so, what exactly are you paying for?)
I half agree with you in that the UK makes the tax system administratively easy for most individual tax payers.
That said, i think the system as a while is far too complicated. The application is simplified, but the rules are far too complex.
We got pre-calculated returns as an alternative in the early 90's, by the time I got my first real job in the early 00's everyone used the pre-calculated one and just made changes as necessary. The first years I got my tax return in the mail and I think a few years I had to mail back a signed copy, but these days everything is digital and if you don't have to make any changes you don't have to do anything at all.
Back then you also had to physically deliver your tax deduction card to your employer so they could deduct tax correctly, but these days that is also digital and salary systems just fetches the current deduction card before running salary jobs every month.
I know French people who live near the Swiss border and who file their tax returns in a matter of minutes because all the information is pre-filled via their employer's income statement and their bank.
They are two different countries, and Switzerland is not a member of the EU.
When French bureaucracy is simpler and more efficient than your tax collection system, you have a problem.
You are not special, other countries have complex tax systems too and have figured it out, but you just refuse to and make excuses
They were rolling out a free service over the past few years that was getting solid reviews and plenty of people used[0][1]. One of the top priorities[2] of the Trump administration and DOGE was to prevent that and it has been since shut down[3] and partly open sourced[4].
0: https://www.vox.com/future-perfect/24071005/irs-direct-file-...
1: https://www.investopedia.com/early-reaction-to-the-new-irs-f...
2: https://apnews.com/article/irs-direct-file-musk-18f-6a4dc35a...
3:https://www.cnbc.com/2025/07/30/irs-chief-says-agency-plans-...
4: https://github.com/IRS-Public/direct-file
They do provide the forms, you simply fill them out. I did that every year without consulting any specialist or extra services. Much easier than in Europe. It was a 20min affair.
The whole point of the article is to answer to that question.
They do, it's called free fillable forms. If you have salary-only income that's about how long it takes.
https://www.irs.gov/e-file-providers/free-file-fillable-form...
Tax prep software exists for people with more complicated tax situations and people who are unwilling to add and subtract a couple of numbers. The 1040 form is not complicated and anyone can use it to file their taxes for free.
> I never understood why the Revenue can't provide a set of simple online forms for tax returns like India does.
Did you read the article? The TL;DR summary is that the US government has proposed doing this in the past, but has been lobbied against it by companies that seek to profit from software to help prepare tax returns.
the UK seems to be going in this same bad direction now "As part of our journey to modernise and digitise our filing routes, all accounts must be filed using commercial software from 1 April 2027." https://changestoukcompanylaw.campaign.gov.uk/changes-to-acc...
you used to be able to do this yourself on the gov website for free
That's company taxes only, not individuals, a huge difference
yeah that is true, but still really annoying for the tiny companies I talked to
Tell me about it! The bottom tier subscription services are also subtly crippled to make filing MTD tax returns difficult. eg. Xero's lowest tier doesn't let you easily add cash payments (without jumping through hoops for each payment).
It is insane how the UK seems hellbent on implementing the things that are shit about the USA
Eh, that’s companies rather than individuals, and while it’s still objectionable it’s not quite in the same league.
If you’re running a company you probably already have an accountant, and they’re probably already using one of those pieces of software. Or you’re using something like Xero, which is already on the list.
agreed it's not the same league, but it's still annoying for tiny companies that don't have much revenue
Paying to file taxes, and then getting you tax refund as an Amazon gift card -- that's very American :)
What? I just googled, and found it is actually a real thing. Holy molly! Has Amazon become a federal system for distribution of money and goods? What next? coupons for burgers, Netflix credit?
I assume this is done by the company, not the IRS.
But where is the company getting the refund from?
I think its usually like a person is due to receive a $1,000 refund and the company they did their taxes through will give them the offer to immediately get an Amazon gift card for $800 instead of waiting for fed and state refunds to hit their bank accounts.
Boring dystopia.
They are not as harmful as some other corporations, but for some weird reason I hate such parasites on our society much more than some bigger offenders. And I'm not even from USA :) . How do you all tolerate this?
Few people give a crap because a two figure sum for tax prep once a year is just about the smallest thorn the government and government adjacent or intertwined industries put in the side of the average person even if it's arguably less justified than some of the other ones.
I wonder why there has never been open source tax software. It seems exactly the kind of thing the community would be good at. I imagine it would be hard for very complex taxes. But for the 60% that have simple taxes, I don’t think it should be unmanageable.
Is it a matter of liability? Like I could definitely see a big issue with mistakes — even if it was just operator error.
Fast moving regulations and legislation. You need both a legal and developer team, at least to follow and implement things as soon as they become the law.
Even the revision of yearly variables is a considerable task.
And often the yearly variables aren't published until a few weeks or months in advance, so it's a scramble every year.
Many laws also exist specifically to keep industries afloat. The complicated tax code keeps many lawyers and accountants in business.
> The complicated tax code keeps many lawyers and accountants in business.
At least, some of the complications in these are not intentional, but result of centuries old evolution of these systems.
Maritime shipping uses centuries old systems to handle costs in shipping accidents for example. I forgot the exact name of the system, but while the method is extremely fair, it's equally complicated. The whole premise stems from "This ship has sailed because you wanted me to carry your cargo", and becomes something mind boggling.
I'm sure there are some steps taken to keep people busy, but chalking up everything to it is unfair and wrong.
Open Tax Solver has been around for years and is still maintained and updated each year.
https://opentaxsolver.sourceforge.net/
The UI leaves a lot to be desired, but it does work and I used it one year.
> Is it a matter of liability?
No, government builds all kinds of IT systems for a wide range of sensitive functions, and they certainly have the means to build or fund an open source tax filing system.
The reason they don’t is twofold: A) massive corporate interests lobby the government to ensure projects like this don’t happen, and B) building functional infrastructure for the people goes against certain political narratives that government is useless and wasteful. If you campaign on the idea that government is inept and wasteful, you’re not likely to support projects that undermine your platform.
https://github.com/IRS-Public/direct-file/tree/main
It seems their business model is more existentially challenged by LLMs these days. I’m waiting for the regulations preventing AI being used for taxes and legal counsel
Edit: This is timely being on the homepage: https://news.ycombinator.com/item?id=45601230
There are many things I would trust an AI with, but my taxes are not one of them.
Certainly not to do your taxes, but they're useful for tax questions, as long as your verify the responses.
Taxes are actually not a bad problem for AI, because a lot of the final calculations can be easily verified/sanity checked. The AI won't be able to get away with any math errors, the issues you'll likely see are incorrect categorisation of income or suboptimal deductions. The substeps like categorisation shouldn't be too difficult to manually verify
Don't use AI for tasks where you don't have the qualifications to verify that the result is correct.
We've taken the one task that computers are inherently good at and somehow made it worse.
The problem is if you need to verify everything you might as well do it yourself.
I'm not convinced an AI will ever know how to distinguish a personal and business expense from a CSV dump of your credit card too.
If you're going to go down the rabbit hole of creating a CSV, you can already parse and categorize it pretty easily without AI. I've built and have been using https://github.com/nickjj/plutus for a bit now and I've gotten quarterly taxes down to less than 10 minutes.
I agree, tax prep will probably be done by AI soon, for better or worse.
On the other hand, there's a broader business model here: lobbying to obfuscate mandatory government paperwork so that a 3rd party service is practically a requirement. It's not difficult to see AI companies expanding into that industry.
Literally the only reason to use "AI" (it's not actually AI so we should stop calling it that) is to inflate the profits of LLM companies.
We already have reliable systems that do these things in the rest of the world, not to mention TurboTax already does it in the US without LLMs.
this seems to fall into the category of Intuit offering AI (RAG/MCP + tuned base model) and not people directly going to chatgpt for half-baked advice (and still needing to fill out all the forms and perform hand calculations themselves)?
Why isn't there a non-profit doing this work?
If this is as big of a deal as people claim, surely a non-profit could have written a free tax filing app and just made it available to people?
Does TurboTax have any kind of regulatory moat / AT&T style monopoly?
Tax shouldn't even have to be handled by anyone. It should be part of the currency itself.
Reminder: FreeTaxUSA is a great alternative, I've been using it to file my taxes the last 3 years and plan to use it if I can this year. My situation is made harder this year by my wife starting a business.
https://www.freetaxusa.com/
The problem is how ridiculously bloated and inefficient the US tax system is. Companies see that as a possibility for exploitation and wet their shirts with drool.
(2019)
Some previous discussion:
2021 https://news.ycombinator.com/item?id=26060414
2019 https://news.ycombinator.com/item?id=21281411
And some others, macroexpanded.
TurboTax’s 20-Year Fight to Stop Americans from Filing Taxes for Free (2019) - https://news.ycombinator.com/item?id=34594832 - Jan 2023 (1 comment)
TurboTax Tricked You into Paying to File Your Taxes (2019) - https://news.ycombinator.com/item?id=26102695 - Feb 2021 (306 comments)
TurboTax’s 20-Year Fight to Stop Americans from Filing Taxes for Free (2019) - https://news.ycombinator.com/item?id=26060414 - Feb 2021 (199 comments)
FTC Is Investigating Intuit over TurboTax Practices - https://news.ycombinator.com/item?id=24409093 - Sept 2020 (194 comments)
IRS Reforms Free File Program, Drops Agreement Not to Compete with TurboTax - https://news.ycombinator.com/item?id=21923220 - Dec 2019 (448 comments)
TurboTax’s 20-Year Fight to Stop Americans from Filing Taxes for Free - https://news.ycombinator.com/item?id=21281411 - Oct 2019 (447 comments)
TurboTax to charge more lower-income customers - https://news.ycombinator.com/item?id=20461169 - July 2019 (81 comments)
TurboTax Uses a “Military Discount” to Trick Troops into Paying to File Taxes - https://news.ycombinator.com/item?id=19994118 - May 2019 (42 comments)
Listen to TurboTax Lie to Get Out of Refunding Overcharged Customers - https://news.ycombinator.com/item?id=19870242 - May 2019 (44 comments)
TurboTax and H&R Block Saw Free Tax Filing as a Threat - https://news.ycombinator.com/item?id=19810981 - May 2019 (143 comments)
Congress Is About to Ban the US Government from Offering Free Online Tax Filing - https://news.ycombinator.com/item?id=19613725 - April 2019 (696 comments)
TurboTax Hides Its Free File Page from Search Engines - https://news.ycombinator.com/item?id=19758126 - April 2019 (262 comments)
TurboTax Uses Dark Patterns to Trick You into Paying to File Your Taxes - https://news.ycombinator.com/item?id=19718284 - April 2019 (274 comments)
How the Maker of TurboTax Fought Free, Simple Tax Filing (2013) - https://news.ycombinator.com/item?id=19392673 - March 2019 (253 comments)
How the Maker of TurboTax Fought Free, Simple Tax Filing (2013) - https://news.ycombinator.com/item?id=13853150 - March 2017 (439 comments)
How the Maker of TurboTax Fought Free, Simple Tax Filing - https://news.ycombinator.com/item?id=5443203 - March 2013 (330 comments)
Jeez, 13 years of history.
Yeah, there's been a lot of talk about it for years.
What's especially sad is that some major progress was made toward having a free official system just a few years ago, but now it's being torn apart.
https://www.pbs.org/newshour/politics/irs-moves-forward-with...
https://home.treasury.gov/news/press-releases/jy2629
https://apnews.com/article/irs-direct-file-tax-returns-free-...
One time I wrote a screed into a turbo tax feedback form on how they are an awful business and no one responded except that they refunded my money.