The IRS already has all your income tax data - so why do Americans still have to file?

[BigmanPigman]

https://news.yahoo.com/irs-already-income-tax-data-130029063.html

"The government could toss the 1040 in the trash. Doing taxes in the U.S. is notoriously complicated and costly. And it gets even worse when there are delays and backlogs, making it especially hard to reach the Internal Revenue Service for assistance. But to me this raises an important question: Why should taxpayers have to navigate the tedious, costly tax filing system at all? As an expert on the U.S. tax system, I see America’s costly and time-consuming tax reporting system as a consequence of its relationship with the commercial tax preparation industry, which lobbies Congress to maintain the status quo."

"At least 30 countries permit return-free filing, including Denmark, Sweden, Spain and the United Kingdom. Furthermore, 95% of American taxpayers receive at least one of more than 30 types of information returns that let the government know their exact income. These information returns give the government everything it needs to fill out most taxpayers’ returns."

"Commercial tax preparation...
About two decades ago, Congress directed the IRS to provide low-income taxpayers with free tax preparation. The agency responded in 2002 with “Free File,” a public-private partnership between the government and the tax-preparation industry. As part of the deal, the IRS agreed not to compete with the private sector in the free tax preparation market."

"The public part of Free File consists of the IRS herding taxpayers to commercial tax -preparation websites. The private part consists of those commercial entities diverting taxpayers toward costly alternatives.
According to the Treasury Inspector General for Tax Administration, which oversees IRS activities, private partners use computer code to hide the free websites and take unsuspecting taxpayers to paid sites. Should a taxpayer discover a free preparation alternative, the private preparers impose various restrictions such as income or the use of various forms as an excuse to kick taxpayers back to paid preparation. Consequently, of the more than 100 million taxpayers eligible for free help, 35% end up paying for tax preparation and 60% never even visit the free websites. Instead of 70% of Americans receiving free tax preparation, commercial companies whittled that percentage down to 3%."

"Tax savings and evasion...
Perhaps you are guessing that there are valid policy justifications for avoiding government and empowering the private sector. Judge those arguments yourself. One argument from commercial tax preparers is that taxpayers will miss out on valuable tax savings if they rely on free government preparation."

* More at the link

[Wicked Blue]

1. It creates jobs for all those lawyers and tax accountants

who would otherwise be roaming the streets doing goodness knows what

[leftieNanner]

2. And those Turbo Tax (Intuit) execs have car payments to make as well!

Maybe their ski lodge in Aspen has a mortgage.

Think of those "poor" people too.

[jimfields33]

7. That's for sure

Just make it 10 percent across the board and be done with it. Don’t most states do this? Obviously not 10 percent but a percentage every one pays.

[Groundhawg]

3. HR Block lobby

[dameatball]

4. Sorry, but I do not want that person dressed up as the Statue of Liberty getting pissed at me. But

yes, for most I think some kind of auto response from IRS would eliminate a lot of unnecessary correspondence, expense and even errors. It's worth considering.

[OilemFirchen]

5. 27 million Americans file a Schedule C.

How the fuck would the evil gummint "have" that information?

Self-proclaimed "expert on the U.S. tax system" sez whut?

[Jazz Jon]

6. Small businesses

There's a lot of people like me for whom the IRS has far from complete information. I run a small business, and they have no idea about my sales. Also, a great many people with regular jobs do gigs on the side or sell things during rhe year in private sales. The IRS does not have that info either. They can't even predict who might be doing that, so everyone has to file. If you have no income besides that from a standard job with white hat policies, then you file simply to say, "I have no other income". I need my tax preparer accountant very badly and I am glad to support her.

If you want to complain about something, complain about the tax laws. I'll join you. There is no single entity in the universe more complicated than the US tax code.

[MOMFUDSKI]

9. My husband did our taxes TODAY

using TaxSlayer.com which was on the IRS list of approved online companies. And it was free. We are retired so it was pretty simple. We used to have an accountant for our Corporation and it certainly wasn't cheap. Used to file ourselves using Schedule C but then Jebbie the Bush MADE all biz in FL incorporate. Many mom and pops gave it up at that time. So it is good to be back to doing our own taxes.

[Jazz Jon]

11. Wow.

Jeb Bush made all businesses of any size incorporate? That would have been a cut-throat move sponsored by big business to force mom and pop business out of business! Damn. I would have to close up shop if they did that to me. It's many times more complicated to incorporate vs filing a Schedule C.

[Fiendish Thingy]

10. IRS doesn't have all information on self employed taxpayers or sole proprietors

And that’s a lot of people.

[Igel]

12. Hardly.

They have all the data for the simplest returns.

The legislation that would have made every transaction over $600 reportable died, but the IRS has proposed a rule for adoption that accomplishes the same thing. What you can't get through a legislature you can get through a bureaucracy.

Still it remains true that they don't know my state tax info, health expenses, who's my dependent or if I'm dead. What deductions will I claim, what are my business losses (if I had a business) or classroom expenses. Plus there's the entire cash economy side of things, or if I'm filing with my wife or if my wife is now my ex. I've claimed "single" for my W-4 for years before the divorce paperwork was even filed.

And let's not forget, just because they have the data doesn't mean they have a system that can sort, collate, organize, and amalgamate the date for each individual. Sort of assuming that the state knows all and controls all.

One can surely rely on free government preparation--but the government isn't all-wise and all-knowing. Simple returns won't lose; complex ones will.

But I guess claiming all the deductions allowed by law is now "tax avoidance" and evil--presumably including claiming the standard deduction?

[MichMan]

13. Anyone receiving $600 through payment services like Paypal, Venmo and others now will get a 1099

It was part of the American Rescue Plan passed last year. Lots of people that sell random stuff on ebay are pretty angry about it right now.

The IRS is going to assume 100% of it is income, and it will be up to the filer to try and prove how much they originally paid for the old car part they found in the basement that has been there since 1998.

[marie999]

14. If we didn't have to file how would the IRS know if we wanted to join or separately?

How do they know who is married, single, or head of household?

[IbogaProject]

15. IRS also knows bank deposits

IRS also knows bank deposits, once the total is above $600 cumulative during each year. The tax should be graduated.

[nitpicker]

16. And what about those selling a house?

Although a lot of people don't have to report it because any gain is less than the $250K/500K exclusion limits, some others who bought before the mid-2000s real estate bubble have reportable capital gains.

[twodogsbarking]

17. Collecting money shouldn't be complicated at all.

But they have made it so.