IRS launches paperless processing initiative(home.treasury.gov)
home.treasury.gov
IRS launches paperless processing initiative
https://home.treasury.gov/news/press-releases/jy1666
49 comments
Welcome to 21st century. Sincerely, the rest of the developed world.
I hope TurboTax and friends doesn't manage to screw this one up.
I hope TurboTax and friends doesn't manage to screw this one up.
Given this doesn't interfere with their business I don't see why they would.
They must be pissed that their ROI for their lobbying money is so low. Fingers crossed!
Big thanks to y'all at the IRS and US Digital Service who are working on this.
>Taxpayers will be able to digitally submit all correspondence, non-tax forms, and responses to notices;
Nice! I had to reply to a notice last year, and fortunately, I was able to respond to it "digitally", but only via a workaround: since one accepted medium is fax, I used an e-fax service to send the response.[1] It definitely felt like there had to be a better way.
[1] Shout-out to faxrocket, featured on HN: https://news.ycombinator.com/item?id=15484390
Nice! I had to reply to a notice last year, and fortunately, I was able to respond to it "digitally", but only via a workaround: since one accepted medium is fax, I used an e-fax service to send the response.[1] It definitely felt like there had to be a better way.
[1] Shout-out to faxrocket, featured on HN: https://news.ycombinator.com/item?id=15484390
Maybe they just got funding for email?
I think it is intentional that governments, especially bigger ones like state and federal, make on the record communication with them more difficult. I have called government offices many times only to receive a message that says “call back the next business day”..at 10AM. No way to submit an email, or even a simple call back function.
No, you have to spend hours of your time trying to reach them, and the only way this makes sense is if they want to make some people give up.
The only advice for this is to contact a politician and hope they take up your personal cause. Basically, what you would expect in a poor, developing country, except there, at least it is known how much you need to bribe someone to get service.
I think it is intentional that governments, especially bigger ones like state and federal, make on the record communication with them more difficult. I have called government offices many times only to receive a message that says “call back the next business day”..at 10AM. No way to submit an email, or even a simple call back function.
No, you have to spend hours of your time trying to reach them, and the only way this makes sense is if they want to make some people give up.
The only advice for this is to contact a politician and hope they take up your personal cause. Basically, what you would expect in a poor, developing country, except there, at least it is known how much you need to bribe someone to get service.
They currently don't allow individuals to e-file unless they either:
1. Acquire commercial software, or; 2. Hire a paid preparer to file it, or; 3. Use "Free File Fillable Forms" (but this isn't an option if you fall into one of the numerous special cases that it doesn't support)
So, basically, mailing in a paper return is the only free option for some people (myself included).
I genuinely don't understand why paid preparers can e-file directly with the IRS, but individuals can't. There's nothing in the linked article that says this will change, so if they go ahead and ban paper filing in a couple years, I'm not sure what options are left for people like me.
Yes, I can easily afford to shell out for software or a paid preparer if I really have to, but I'm very much against doing this on principle, since the whole tax prep industry in the US is a huge rent-seeking racket.
1. Acquire commercial software, or; 2. Hire a paid preparer to file it, or; 3. Use "Free File Fillable Forms" (but this isn't an option if you fall into one of the numerous special cases that it doesn't support)
So, basically, mailing in a paper return is the only free option for some people (myself included).
I genuinely don't understand why paid preparers can e-file directly with the IRS, but individuals can't. There's nothing in the linked article that says this will change, so if they go ahead and ban paper filing in a couple years, I'm not sure what options are left for people like me.
Yes, I can easily afford to shell out for software or a paid preparer if I really have to, but I'm very much against doing this on principle, since the whole tax prep industry in the US is a huge rent-seeking racket.
Correct me if I’m wrong, but my understanding is that paid preparers can only e file if they are using a commercial software package that supports it such as Lacerte.
Are they going to be using MOVEit for our sensitive documents?
This would be a godsend! I'm not sure of its applicability to non-resident aliens yet, but having to mail the documents has been a really slow process. They don't open them even after two months of receiving them, and then take another few weeks to process.
Going digital would at least alleviate the fears of having submitted the returns on time, since otherwise IRS doesn't acknowledge them receiving on/before time.
Going digital would at least alleviate the fears of having submitted the returns on time, since otherwise IRS doesn't acknowledge them receiving on/before time.
will this allow me to digitally file my amended federal taxes? That's the one thing that I was looking forward to when I started reading this and possible may impact most taxpayers but looks like IRS still needs amended tax returns in a paper form being mailed out to them?
Filing amended returns electronically with the IRS (efile) has been available for several years. The ability to catch up with unfiled prior year returns by efiling has been available for even longer. (IOW, you can efile your unfiled 2021 tax return in 2023).
> This includes amendments to Forms 940, 941, and 941SSPR, which are some of the most common forms taxpayers file when amending returns.
How about this: let’s go to a single flat rate for everyone and everything (say 20%) and eliminate all deductions except for a standard deduction (say whatever is the poverty line, eg $25000 or so). This would be for corporations and individuals.
Now your taxes can be filed on a postcard. And the IRS can preprint it and send it to you, with an online code or something to click “ok” on a web site and be done.
The government uses the tax code like a Swiss Army knife, trying to reward friends, punish enemies, encourage and discourage behaviors, etc. As a result we collectively spend millions of person hours and untold $$$ paying accountants to find and exploit loopholes and try and avoid undue attention.
Let’s just stop.
Now your taxes can be filed on a postcard. And the IRS can preprint it and send it to you, with an online code or something to click “ok” on a web site and be done.
The government uses the tax code like a Swiss Army knife, trying to reward friends, punish enemies, encourage and discourage behaviors, etc. As a result we collectively spend millions of person hours and untold $$$ paying accountants to find and exploit loopholes and try and avoid undue attention.
Let’s just stop.
Sounds great, except a flat tax rate is extremely regressive so you either tank the amount of tax revenue the government collects, or you punish low income earners far more than wealthy individuals.
Wealthy individuals already pay a far lower rate of tax on their income from investments than employees do on earned income.
For a single filer in 2023 the standard deduction is $13,850. After that income is taxed differently.
Income tax rates for single filer earned income (excludes social security tax of 6.2% each for employee and employer up to $160,200):
10% $0 to $11,000
12% $11,000 to $44,725
22% $44,725 to $95,375
24% $95,375 to $182,100
32% $182,100 to $231,250
35% $231,250 to $578,125
37% $578,125 or more
Long term capital gains tax rates paid on most investment income (excludes 3.8% NIIT of 3.8% for those with income over $200,000):
0% $0 to $41,675
15% $41,676 to $459,750
20% $459,750 or more
It's perfectly possible for a flat tax to be far more progressive than the tax system today, though its rate would be far higher than 20%.
The highest effective marginal tax rates are often faced by those on lower incomes as the various transfer programs (earned income tax credit, medicare, healthcare subsidies, etc.) have uncoordinated phase outs. In 2012 it was particularly egregious and effective marginal rates approached 100% for those earning around $20,000. https://johnhcochrane.blogspot.com/2012/11/taxes-and-cliffs....
Personally I think it would make more sense for everyone to pay a flat tax of say 50% paired with a basic income for all (including children) and publicly funded healthcare.
For a single filer in 2023 the standard deduction is $13,850. After that income is taxed differently.
Income tax rates for single filer earned income (excludes social security tax of 6.2% each for employee and employer up to $160,200):
10% $0 to $11,000
12% $11,000 to $44,725
22% $44,725 to $95,375
24% $95,375 to $182,100
32% $182,100 to $231,250
35% $231,250 to $578,125
37% $578,125 or more
Long term capital gains tax rates paid on most investment income (excludes 3.8% NIIT of 3.8% for those with income over $200,000):
0% $0 to $41,675
15% $41,676 to $459,750
20% $459,750 or more
It's perfectly possible for a flat tax to be far more progressive than the tax system today, though its rate would be far higher than 20%.
The highest effective marginal tax rates are often faced by those on lower incomes as the various transfer programs (earned income tax credit, medicare, healthcare subsidies, etc.) have uncoordinated phase outs. In 2012 it was particularly egregious and effective marginal rates approached 100% for those earning around $20,000. https://johnhcochrane.blogspot.com/2012/11/taxes-and-cliffs....
Personally I think it would make more sense for everyone to pay a flat tax of say 50% paired with a basic income for all (including children) and publicly funded healthcare.
I’d be paying over 65% in California. I would quit my job the next day.
My state has flat tax rate of federal taxable income (after deductions). Most years its free online filing and typing 5 or 6 numbers. Takes five minutes. The tax softwares dont like that because they get half their income from state filings.
I dislike that I dont get the long term capital gains discount like on federal.
I dislike that I dont get the long term capital gains discount like on federal.
The regressive aspect of it is offset by the large standard deduction.
That still won't solve the issue. The reason for progressive taxation is that there simply isn't a tax rate that allows you to both sufficiently fund the government and doesn't punish low income earners. The gulf between what the lowest and highest earners make is simply so vast that you can't do it without progressive taxation.
> The reason for progressive taxation is that there simply isn't a tax rate that allows you to both sufficiently fund the government and doesn't punish low income earners.
Sure there is. After eliminating deductions and special treatment (including, e.g., for capital gains), do a flat income tax at the current maximum marginal rate with a standard exemption at the level that results in the same median total tax rate as currently.
You'll more than make up on the high end the revenue you’ll lose on the low end. Of course, all actual flat tax proposals are designed to be massive tax cuts, especially for the rich, which is why they tend to feature a flat rate that's similar to the marginal rate for one of the lower brackets. Do that and you can't pay for much government.
Sure there is. After eliminating deductions and special treatment (including, e.g., for capital gains), do a flat income tax at the current maximum marginal rate with a standard exemption at the level that results in the same median total tax rate as currently.
You'll more than make up on the high end the revenue you’ll lose on the low end. Of course, all actual flat tax proposals are designed to be massive tax cuts, especially for the rich, which is why they tend to feature a flat rate that's similar to the marginal rate for one of the lower brackets. Do that and you can't pay for much government.
I disagree. “Funding the government “ is a policy decision; everyone needs to live within a budget. Secondly, eliminating all deductions except a standard deduction actually increases funding by avoiding the situation where megacorps don’t pay any taxes.
Wealthy Democrats living abroad do not file US tax returns and the IRS never goes after them because they are friends with the leadership back in the country.
[citation needed]
Hearsay from my friend who lives abroad and who was attending a Democrats abroad function and they kicked him out of the meeting after he suggested that they pass a rule that anybody who could be eligible to be elected to the board of directors should be able to pass a basic tax audit. There was support in the audience but the organizers immediately banned him.
There are stories of the IRS being used as a political weapon floating around online as well.
There are stories of the IRS being used as a political weapon floating around online as well.
There are stories of alien abductions floating around online as well.
You're right my story is completely implausible
That's not my point. My point is that "there's stories of X floating around on the Internet" is basically the opposite of evidence.
What about business deductions, or are you okay with low-margin businesses being forced to evaporate overnight? And what about all the charities that suddenly get vastly less donations because they're no longer deductible? Also as the other comment notes, that's either a drastic cut to revenue, or incredibly regressive on lower-income earners.
Taxes are more complicated than they need to be, but they're also complicated because the world is complicated.
Taxes are more complicated than they need to be, but they're also complicated because the world is complicated.
So how would the government now incentivize things it wants and disincentives things it doesn't want?
Most recently I improved insulation at my house. I was surprised to see an IRS form that gives me tax advantages for making my home more energy efficient. How would the government now do this?
Most recently I improved insulation at my house. I was surprised to see an IRS form that gives me tax advantages for making my home more energy efficient. How would the government now do this?
The marginal tax brackets are not what makes our tax system complicated. You can write them on a single page.
It's all the deductions and exemptions and carve outs. It's important to have higher rates on higher income earners to put pressure against income in equality.
It's all the deductions and exemptions and carve outs. It's important to have higher rates on higher income earners to put pressure against income in equality.
Or how about the fed gets its money from the states and the states figure out taxes.
Finally, at least it's promising that the process looks to be less bad
They’re getting scared. Trying to justify their paychecks.
Why do this now?
Why do this now?
The UK has had online tax returns since 2001. It always amazes me how many things in the US still use paper.
The article is primarily about processing documents other than actual income tax returns. Does the U.K. have a completely digital (paperless) way of communicating with taxpayers and resolving issues after the tax return is filed?
The U.S. has had "online tax returns" (e-file) since the 1990s. Paid tax preparers are mandated to efile, it is only the minority of DIY taxpayers who insist on paper filing their income tax returns.
The U.S. has had "online tax returns" (e-file) since the 1990s. Paid tax preparers are mandated to efile, it is only the minority of DIY taxpayers who insist on paper filing their income tax returns.
>it is only the minority of DIY taxpayers who insist on paper filing their income tax returns
This is a gross misrepresentation of the situation. Being forced to chop down and bleach trees if you don’t want to pay a bribe to a rent seeking company that lobbies directly against your interests is not “insisting on paper filing” at all.
This is a gross misrepresentation of the situation. Being forced to chop down and bleach trees if you don’t want to pay a bribe to a rent seeking company that lobbies directly against your interests is not “insisting on paper filing” at all.
So you are claiming that not wanting to do one thing means you are forced to do some other thing? It is a choice, nothing is "forced".
More importantly, you don't have to "pay a bribe to a rent-seeking company" (talk about gross misrepresentation!), the IRS offers free online filing to everyone (and I'm not talking about the "Free file alliance" with tax software vendors, but a direct service from the IRS).
https://www.irs.gov/e-file-providers/free-file-fillable-form...
More importantly, you don't have to "pay a bribe to a rent-seeking company" (talk about gross misrepresentation!), the IRS offers free online filing to everyone (and I'm not talking about the "Free file alliance" with tax software vendors, but a direct service from the IRS).
https://www.irs.gov/e-file-providers/free-file-fillable-form...
> the IRS offers free online filing to everyone
Not to dual-status individuals for example. Those individuals must mail/fax their return to IRS.
Not to dual-status individuals for example. Those individuals must mail/fax their return to IRS.
You are correct. For the tiny fraction of taxpayers who experience this once or twice in a lifetime event (dual status), they must paper file their split-year returns. I am sure there are some other extremely uncommon forms that are not supported as well.
The whole point of this discussion introduced by the article linked at the top of the page is that electronic communication is only available to the general public for initial filing.
Free Fillable Forms is run by "On-Line Taxes, Inc", not the IRS. It's not a direct service.
Thank you for the detail. It must be a sub-contractor to the IRS. The front page of the Free File Fillable Forms User Guide, however, is 100% branded as an IRS service, the online help is through the IRS web site[0], and the service is normally accessed initiallhy via the IRS web site, so you would only know about On-Line Taxes Inc. if you spent time reading, for example, the terms of service. For practical purposes, the taxpayer will see this as an IRS service, not a 3rd party. This is opposed to the Free File Alliance, where the taxpayer is only given a list of participating vendors and then is on their own.
[0]https://www.irs.gov/e-file-providers/free-file-fillable-form...
[0]https://www.irs.gov/e-file-providers/free-file-fillable-form...
FreeTaxUSA let's you file federal taxes completely for free. (They have paid add-ons and services of course. But the service is Actually free, unlike TurboTax 'free edition')
Electronic filing of tax returns has been available for over 30 years. This is about everything else.
[deleted]
This is about handling all the other activities surrounding tax filing, such as getting copies of 3rd-party information returns (W-2s, 1099-Rs, etc), receiving and responding to notices regarding errors or questions in the previously filed tax return, etc.
California FTB (tax agency) set up an online system for taxpayers starting five or more years ago, with continuing enhancements since then. IRS is just now catching up, by providing the ability for a taxpayer (or tax practitioner with permission) to create a secure login account with access to their personal information.