So I know intuit is an easy and guilty party in this whole situation, but let’s not pretend it’s all their fault. Plenty of politicians benefit from this mess.
This isn’t meant to pick sides in politics, but if you’re a politician and you’re running a “lower taxes and less government bureaucracy” re-election campaign, it’s in your best interest to make paying your taxes as noticeable and painful as possible. It’s in politicians best interests to make the government as unfriendly and time consuming as possible.
Filing a tax return manually should only be necessary for a small percentage of people with complex situations. Most people’s entire income is a single W2, and their payroll provider should be able to deduct the exact amount down to the penny. No-op for the individual. Everyone else can keep their existing process applying for deductions and breaking out their income streams. Anything else is theater to make you hate taxes.
> Most people’s entire income is a single W2, and their payroll provider should be able to deduct the exact amount down to the penny.
People also like to get steady paychecks. In any progressive tax system, anyone who leaves a job mid-year would either mean everyone would have to have paychecks that varied or job changers would have a discrepancy at the end.
Having paychecks varying due to taxes would no doubt be spun by some as “theater to make you hate you taxes”.
Homeowners with mortgages probably don’t want to share those details with their employer, out of some combination of “it’s none of their business” and “could they use that information against me somehow?”
I get that filing taxes is annoying, but trying to set things up so my payroll department eliminates that seems the wrong path versus making the front door to the filing system easier to use.
> anyone who leaves a job mid-year would either mean everyone would have to have paychecks that varied or job changers would have a discrepancy at the end
The UK "P45" system mostly avoids this? If you go from pay £X to pay £Y it's not impossible to calculate how much you will owe at the end of the year and distribute that over the remaining paycheques.
(It looks like it does/could.) I'd much rather file taxes than give the details down to the penny of my prior pay from employer 1 to my new employer 2 (which is what I think the P45 system does).
But that probably reflects more my own stance on personal and financial privacy than on anything fundamentally negative about the practical value of preserving that privacy.
And in the case where you don't/can't provide a P45 they take an "emergency" high rate of tax instead. Which you can claim back once the information is provided, or at the end of the tax year. I don't know if you can legitimately decide to not provide a P45 for some personal reason, but it could be an expensive decision (in the medium term).
I would say this definitely reflects your personal stance on privacy, I think most people would rather have the money they earned sooner rather than later.
Intuit isn't the good guy here, but they get a ridiculous amount of hate proportional to their role in the system, and they did actually make things better. The status quo until consumer tax filing software like TurboTax was people paying accountants and accounting firms hundreds of dollars to prepare their very simple taxes after the rumor mill + accountant ads put the fear of God in them that the IRS would destroy their lives.
Millions of people still do this to this day, and it's very hard to talk them out of it. Of course, if you have a complicated tax situation, hiring an accountant is worth it. But I'm talking about people with a W2 and maybe a few 1099s being convinced that even TurboTax is a bad idea because "my guy can get me so much more" or "the IRS is going to jail me if I make a mistake in the software."
At some point, the ubiquity of shopping mall accountants (e.g. H&R Block) convinced a lot of people that they were idiots to do their own taxes by hand. Personally I piggybacked off my parents' accountant and still use the same firm. At this point, it almost certainly makes sense for me to use an accountant but I could probably have just used tax software for less money at least for a time.
Serious question. I used Turbotax again this year. I want to get off of it next year.
But does Direct File support literally everything? SEP-IRA->Traditional->Roth double rollovers with capital-gains in-between and partially pretax and partially posttax basis, cryptocurrency staking, straddles where you sold one leg before the other, incurred wash sales, sold RSUs but have both capital gains and income taxes associated with them, bought bonds at a market discount, paid estimated taxes, all of that fancy shit?
I hate taxes in this country, why can't they just flat tax all the money I made in the year ...
> Serious question. I used Turbotax again this year. I want to get off of it next year.
If you're doing all that crazy stuff you mentioned, then you're gonna need a tax prep specialist, yeah. But you're in a tiny, tiny minority if you're doing any of that, and you're almost unique if you're doing all of it. So it's OK if the system doesn't optimize for that very special case.
If you're just managing a W-2 and a few 1099s, and maybe one or two of the crazy things you mentioned, then it's easy to just do your own taxes and skip the tax prep scam industry. It takes me about two hours to do mine & my wife's. Most of it is just manually entering data into the IRS's Free Fillable Forms website, and then doing some basic calculator math, then copying most of the same info over to our state taxes. It's not trivial, and it will be a little frustrating your first time doing it, but it's about on the order of middle school math class exam. Not fun, but not graduate level physics or anything.
If you do screw up, the IRS will politely let you know your error and how to fix it. It's not a big deal. (Unless you're intentionally trying to hide something. Don't do that.)
Why would you want a flat tax rate if some of the money you made is not taxable? How is it not worth it if it saves you a thousand dollars?
An efficient economic system is inherently complicated. It should support people who take chances, people who start businesses, and people who innovate. At the same time, the system has to protect itself from people who want to exploit the benefits afforded to people who add value.
Unsuprisingly these constraints will inherently complicate the process.
All these armchair accountants believing they could devise a better tax system shows their ignorance rather than their expertise.
Do you want to see bureaucracy and inefficiency? Go start a business in Germany and compare it to starting a business in the USA.
I think doing taxes in the US can be an enlightening process. It has many benefits, it shows you how much you made, where the taxes go, and that recognition makes politicians less eager to nilly-willy raise taxes.
And with that it does keep your taxes lower, there is no doubt about that.
You spend a few hours and around 50 bucks each year but in return you save thousands. It is a much better deal than the alternative.
> Why would you want a flat tax rate if some of the money you made is not taxable?
The flat tax rate would be much less, of course. Instead of taxing me 50% and a bunch of deductions, tax me a flat 25%. I'll take the deal, and the IRS gets to not have to read five hundred pages of crypto transactions.
Is 25% fair? Why 25%? If you’re a business who spent most of its profits paying others who in turn paid taxes on that, should you pay that much?
What part of your revenue is taxable? Can you defer some of that revenue? Is it revenue?
Are flat taxes fair to all levels of society? Does a billionaire paying 25% hurt just as much as a single mother working minimum wage (the consensus for the longest time has been no, and why we have progressive tax brackets).
I can go on. Current status quo is not great, but it’s the best bad option we have, IMO
At a certain point you just use a CPA or roll your own with the Freefillableforms/literal paper files and I think you are the point where the time/complexity trade offs might warrant a good CPA.
The direct file is just for W-2. I don’t think it can even handle 1099-INT or DIV
At a certain level of complexity you want (need) a certified professional to make sure you are complying within the bounds of tax law and offload some of the audit risk to said professionals.
Is the US Tax Code very complicated? Yes. Is it more so complicated than other nations? I would hazard a “no.” Is that a scam? That’s a question of political philosophy I don’t want to get into here.
I already don't want to give $180 to Intuit, why would I give $2000 to a CPA who is also helping propagate an industry that shouldn't have to exist?
However, if I could first do my own taxes, and then the CPA take a percentage cut of whatever tax they save me after that, instead of charging a flat fee, that would be nice.
CPAs main purpose is to be accountants. The tax filing part is a natural output of their other accounting duties.
Large corporations will have CPAs on payroll + contract with big Corporate Accounting firms to process their books for them. Small mom+pops will hire their local CPA to do the same.
Which, leads me to an idea a much smarter friend once gave me: the tax code of the USA is centered around and made for businesses and business owners. And a large portion of the entire tax/accounting industry exists to service this need.
edit: also a CPA should charge roughly around $250 for your level of complexity? $2000 is closer to the fees for a small-medium business
