What the IRS is planning...

[Joinfortmill]

https://heathercoxrichardson.substack.com/p/april-7-2023?utm_source=substack&utm_medium
Letters from an American: Heather Cox Richardson

As usual, there is a lot of information in this letter. I found this bit about the IRS interesting (my words):

'The Internal Revenue Service yesterday explained how it intends to use the $80 billion appropriated for it by the Inflation Reduction Act. After a decade of budget cuts, audit and enforcement rates on taxpayers earning $1 million or more annually had dropped significantly, from 7.2% in 2011 to just 0.7% in 2019. The IRS will focus on restoring those audits.

It will also look at allowing taxpayers to file directly with the government system for free, as taxpayers in other countries do. This plan has the lobbyists who work for tax preparers fighting back out of fear such a free system will cripple their businesses. They are joining with Republicans to complain that such a system will give the government too much information about individual taxpayers.'

[Buns_of_Fire]

1. "Give the government too much information?" Give me a break.

The government already knows - or can get - more information on you than your own mother can. And that goes whether or not you use TurboTax, TaxAct, or paper forms.

[leftyladyfrommo]

6. That was my response, too. Nothing is private anymore. nt

[HAB911]

8. Translation

We will no longer be free to cheat

[onecaliberal]

26. That. It will interrupt their ability to fuck people over.

[TheBlackAdder]

14. H&R Block & Intuit are the major lobbying firms that are keeping taxes complex.

Last edited Sat Apr 8, 2023, 11:47 AM - Edit history (1)

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We pay $1800 a year for the taxes for me and my 4 kids to get done. The days compiling stuff to send and the stress of doing it really sucks. Some of my kids have simpler returns and that still generates 25 pages of State & Federal returns. Twenty-five fucking pages of shit. My kids look it over and are like WTF is all this shit?

.

[Farmer-Rick]

27. I got audited by the IRS when I was in the Navy

Eversince, I always get someone else to do my taxes. When I used H&R Block, they failed to list standard deductions and our taxes almost doubled. They don't know what they are doing. Don't trust H&R Block.

For those who are curious, the IRS was claiming we owed them $3,000 more in taxes because of a house sale. But after we hired a tax accountant, the IRS ended up owing us about $1,500.

I really think the IRS plays gotcha with the average middle class tax payer. There are so many tax rules and laws that the average person has no way of keeping up with them all. If you make a mistake then they target you with an audit or fine you. Why can't they just tell us what we owe instead of waiting for the average person to make a mistake?

They play gotcha with middle class tax payers and play I can't see you with the filthy rich.

[Johnny2X2X]

33. Absolutely this

There are hundreds of variations for filing your taxes, all of which the IRS will accept so long as you aren’t getting more back than you deserve.

Because if the complexity and tools like Turbo Tax not really looking for the best deductions, the average middle class tax payer pays more taxes than they owe.

Turbo Tac gives you the impression they’re looking for every possible break, but they aren’t. Have a friend do our taxes now and she doubled our refund compared to what Turbo Tax would do.

[TheBlackAdder]

39. H&R fucked up my taxes so bad it took thousands and over year to get out of the mess.

.

Guarantee my ass. Why would you go back to the same group to fix the mistakes they made?

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[TheRealNorth]

43. After 2018, my taxes got much more complex

More subforms that are really not well explained,etc. And I am not itemizing, running a business or side gig, and just doing a standard deduction.

[unblock]

23. Yeah, much better to give too much information to corporations.

Who can then profit of that information, and at some point have a data breach so that your private information becomes public knowledge. No worries, though you'll probably get $0.29 a few years later as your share of a class action suit.

[Glaisne]

28. Correct

[Firestorm49]

36. The information that they get is what you put on the form, just like with a tax preparer.

That is unless they use the Patriot Act to delve into your computer without your knowledge.

[MichMan]

2. Wasn't it always free ?

When did the Government start charging people for the paper IRS forms ? They used to be available at all libraries to copy or to download and print from the IRS website.

I mean you do have to buy a stamp, so there is that part I suppose.

[Joinfortmill]

4. Not for everyone. See link below

https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

[Buns_of_Fire]

5. I think the implication is to allow online filing direct

into the IRS computers. Which, yes, would eliminate the need for third-party vendors to transmit the data for you.

[Farmer-Rick]

30. They should just tell us what we owe

Instead we all get a bad crash course in tax law every year. Or we pay others because tax law is so complicated.

[Kingofalldems]

34. Yeah, no.

[GregariousGroundhog]

44. People still mail paper tax forms?

The article is specifically talking about electronic filing. Most tax filing software has a free version and premium version.

Details vary from product to product; as a rule of thumb, the free version will only allow simple things like reporting wages on form W2 or interest (1099-INT) and dividends (1099-DIV) not requiring Schedule B. They may sometimes support itemized deductions (Schedule A) or unemployment payments (form 1099-G). Things that are more complicated or "non-standard" are usually only covered in the premium versions. Income from gig work (1099-K), or rental income (Schedule E) would be examples.

[MichMan]

46. Should all tax software be free, including the premium versions?

Is mailing of hand prepared tax forms now prohibited? Those of us above a certain age did them that way for years.

[bucolic_frolic]

3. Productive industries vs. non-productive occupations

Bean counters produce nothing. You can't eat what they make. It won't keep you warm, feed you, or add to your material goods.

They should simplify the tax code. Not with a flat tax, or a regressive tax, but with lower rates and eliminating deductions. It's all so complicated even CPAs struggle to keep up.

[jimfields33]

7. I totally agree.

I actually think they should be as easy as how many persons in the family and what goes out of paycheck is how much tax you pay. No paperwork at the end. The only paperwork required is for businesses. That would make it so easy for everyone. The only thing that would change is if you have five dependents you couldn’t make your deduction zero like some do to get more money monthly and pay at the end. That would be an important part of the changes.

[Maeve]

10. Neither my husband nor I get paychecks

We are self-employed so we are businesses. Not easier for us. My mother is retired--income, but no paycheck (SS and a couple pensions, plus investments and IRA) Where would she fit? And then there are my kids in the gig economy...again, the paychecks are always there.

[MichMan]

13. All your routine household expenses are treated as business expenses?

[Maeve]

18. No, but all our income is business income

We don't even claim office space on our Fed taxes--that would put us at higher risk for audit, which is a hassle we can do without (the extra tax we pay is worth not quibbling over). Only business mileage is claimed (to and from gigs), food on the road, etc.

We are sole proprietors, so Ohio lets us earn up to (IIRC) $250,000 before taxing the income (we've never come halfway NEAR that!) but the Fed takes it's toll and we pay self-employment tax as well...not complaining, but it isn't as easy for the self-employed as it would be for paycheck earners. I'd love to be able to skip TurboTax or HRBlock software and just go thru the IRS; Ohio give us that option, too. As does our local tax agency (RITA, for city tax). Filling out the fed software is a yearly pain, but I doubt it can be made much easier for those of us who don't get paychecks.

[Ferrets are Cool]

20. I am also a sole proprietor. I would NEVER think of filing my own taxes.

Just getting all the information together is hard enough.

[Maeve]

24. With good tax software and years of practice, it's not so bad

But estimating next year's income (and tax), particularly the past few years, is a bear!

[jimfields33]

25. Obviously it wouldn't work for 15 percent of the population

There’s always exceptions to the rules. I did leave businesses separate from my point.

[Bob_in_VA]

29. I think you have it backwards

If you claim zero deductions, your withholding is the highest it can be for your family size. Back when I worked for a living (now retired) I would claim zero, that way I would never owe any money since the IRS had already received more tax money than I actually owed.

[jimfields33]

31. Oh you are absolutely correct. I definitely went upside down on that.

I just believe there has to be an easier way for collecting taxes and getting rid of the paperwork. I wish the democratic politicians would focus on a way. If anyone can fix this, it’s the Democratic Party.

[muriel_volestrangler]

45. Don't you have to pay tax on savings interest in the USA?

Would you like to be telling your employer how much interest you earn each year, so that they can take the tax out of your pay, on behalf of the government?

That's a genuine question - in the UK, that's more or less how it works for a lot of people. The banks tell the government how much they pay you in interest, and the government tells your employer (or a pension provider) how to adjust what is withheld from your pay/pension. But since the Republicans frame the new IRS system as "we'll be telling the government too much!", it's worth realising that someone's going to get to know things about you in any system, and if you want an employer to work things out, they've got to know your details.

[TheBlackAdder]

12. Companies view their IT departments the same way, it doesn't generate revenue, just a cost center.

.

No one likes it when chargebacks are in place in companies and it often angers many internally to seek outsources who lie to them that they will do it cheaper, then once they convert to as outsourcer and the company IT department goes away, that outsourcer starts jacking up costs and screws over the company because they would have to rebuild a data center and hire new talent, as the old talent would have quit or went with the outsourcer.

Once the different departments start getting billed for their actual DP costs, some departments are IT heavy, while others lightly use IT. The heavy-use departments get screwed over with higher IT charges, but all departments are needed to run the firm, so many firms treat IT as a common cost that everyone bears.

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[MichMan]

47. It is overhead

I spent my career working in technical support in manufacturing plants.

Everyone who wasn't involved in the actual manufacturing of the widgets was considered necessary overhead and thus non productive. That included IT, Accounting, Human Resources, Engineering, Quality, Shipping, Maintenance, Scheduling etc. Had to have them to run the business, but overhead none the less

[TexasBushwhacker]

48. Most of the complexity in the tax code is for businesses

Personal tax returns are fairly straightforward. If you get a W2 and use the standard deduction, your return is very simple and can be filed online through TurboTax or TaxAct for free. State income tax returns cost a bit.

But if you itemize your deductions, that's not something the IRS can do for you.

I'm a bean counter for a living. I may not "produce" anything, but I keep the books straight for businesses so that my clients can spend their time doing what they do best, whether it's selling real estate, being a physical therapist, an attorney, a restaurant owner or a landscape designer. That's just a few of them.

[The Jungle 1]

9. The rich view the IRS as a joke.

Basically they pay what they want and nothing more. The law means nothing.

[TheBlackAdder]

11. Auditing the top 400 people and top 500 firms would probably reap more revenue than half of US.

[jimfields33]

32. At least now they have to pay 15 percent every year.

President Biden put that under law. I believe this year is the first year. We should get a ton of revenue from that.

[ALBliberal]

15. "Bean Counter" here

Practicing CPA since 1984. I don’t feel IRS allowing direct filing would hurt my business in any significant way. People will continue to need help with accounting, businesses, rentals, estate probate, new company formation and so on. I support Direct Filing for anyone that can use it. And I agree that filing directly would give no more information to the IRS than they would otherwise have.

[dlk]

16. As opposed to privately held corporations having private financial information?

Republicans are generally against government ever helping people, except themselves, of course.

[ALBliberal]

17. So very true.

[paleotn]

19. Exactly. The value add is in creating the returns, not in filing them.

That just an artificial, inefficient "gate keeper" that didn't even exist 40 years ago. Since the complexity of US tax law isn't going to change and is necessary in many cases given the complex world we live in, I don't think the need for your services is going to change at all. I don't even think the tax software guys will lose all that much business for the same reasons. They're all just being obstinate. The real issue is the amount of data the software guys collect and it's marketability. That's what they're pissed about.

[Bob_in_VA]

35. I concur

Ask yourself, what info would direct filing of your tax return give the IRS that they don't already have or won't get from your paper Form 1040 return? They already know your name, your spouse's name, how many kids you have, what your income is and where it came from, what charitable contributions you made, etc. For the majority of us, direct filing to IRS just makes it simpler.

[Marthe48]

21. Another fear ploy

Can't have people using a free government service, now can we?

[wishstar]

22. I haven't gone the commercial filing route because I didn't want to give private companies my info

Repubs saying the govt will have too much info is total gaslighting since the risk to our privacy is from giving private for-profit tax preparers all of our SS numbers, bank acct and credit card numbers as well as personal and financial info that is more likely to be hacked into than IRS records.

I have always prepared my own tax returns using free IRS forms even when spouse and I both had self-employed business income, deductions and complicated finances. I currently pull up IRS's their blank forms online, fill them out on computer and print completed forms and mail them and this year I got my refund in just a couple of weeks after mailing.

[patphil]

37. My wife and I always uses a professional tax consultant to do our taxes.

It cost us about $280. this year, and was filed electronically. We got our federal refund in about a week, and our state refund about 2 weeks later.
They've been doing our taxes for about 30 years now, and we know them well; just two tax consultants and their secretary. We can always be sure that our taxes are correctly filed, and that we get all the deductions we're entitled to.
Even if we could file directly with the IRS for free, we'd still use them. For the few dollars they charge, it's not worth the hassle of doing our own taxes.
And we definitely wouldn't use a national company, since we would lose the personal touch we have now.

[Puppyjive]

38. Where are the tax forms?

I work for a federal agency. I got a call from someone asking for tax forms. I could not figure out where someone can pick up the forms. I know you can go online, but some people just don't use computers. What happened to the time when you picked up the ez form and filed your taxes? No middleman.

[drray23]

41. It used to be at local public libraries for example.nt.

[drray23]

40. We always use a professional tax accountant

Filling the taxes is one less thing I have to worry about doing. I consider my time more valuable that the relatively small fee I pay to the accountant. Besides, it is nice to be able to talk to someone knowledgeable once a year about potential changes in the rules, what best to do and so on. All those things our accountant keeps track off, we do not.
I guess if you have a simple situation, one salary income and nothing else, you could fill yourself. Once it gets more complicated, its far more efficient to let a pro do it.

[ananda]

42. Good. I like free filing.

I've been using OLT and now EZTax and it
works great.