Open Source Tax Software(ctskennerton.github.io)
ctskennerton.github.io
Open Source Tax Software
http://ctskennerton.github.io/2021/08/30/open-source-tax-software/
262 comments
The french initiative started in 2013 is still alive (last commit a few days ago), and passes the gov test suite (they keep in touch with our version of the IRS): https://github.com/openfisca/openfisca-france
The way we got this is interestingly twisted.
French citizens requested the software used by the administration, and they managed to get it!
But, it was written in Mlang, a proprietary language created by the french administration in the 90: https://github.com/MLanguage/mlang.
Someone then decided to create an OCaml compiler that takes mlang and emits python: https://arxiv.org/abs/2011.07966
As a result, we got Open Fisca. I now think there are other techs in the mix...
A slide of the story: https://www.slideshare.net/Etalab/opening-up-the-french-tax-...
But I believe it should be mandatory for the state to provide the source of every softwares they use internally to manage our lives. Also a test suite to allow any citizen to validate their own effort to comply with the law.
Just like laws should be published as diff of the previous laws, in a VCS repo.
The way we got this is interestingly twisted.
French citizens requested the software used by the administration, and they managed to get it!
But, it was written in Mlang, a proprietary language created by the french administration in the 90: https://github.com/MLanguage/mlang.
Someone then decided to create an OCaml compiler that takes mlang and emits python: https://arxiv.org/abs/2011.07966
As a result, we got Open Fisca. I now think there are other techs in the mix...
A slide of the story: https://www.slideshare.net/Etalab/opening-up-the-french-tax-...
But I believe it should be mandatory for the state to provide the source of every softwares they use internally to manage our lives. Also a test suite to allow any citizen to validate their own effort to comply with the law.
Just like laws should be published as diff of the previous laws, in a VCS repo.
I am French and I never heard about this project. I pay taxes on the taxes web site where everything is filled in for me, so no need to use any software. The whole exercice takes literally 30 seconds.
This is not to day that the software is not useful (the API looks great after a quick reading), but it will be used by a very small population.
This is not to day that the software is not useful (the API looks great after a quick reading), but it will be used by a very small population.
I don't use it either, but there is a lot of value in it because it forces formalism and transparency, and allow reproducibility for something as important as taxes.
France has no State/Provincial level taxes. They also do not tax global income.
These add major complexities to the US tax code.
These add major complexities to the US tax code.
The states don't do the taxes manually, either.
Just like France, they could open source their software.
Just like France, they could open source their software.
The US could stop taxing global income for individuals. US companies don't have to pay taxes on their overseas profits, why do people?
US companies do have to pay taxes on overseas profits, which is why they so often have subsidiaries based overseas. Those entities do not have to pay those taxes.
It's a distinction without a difference.
A regular US person gets a US tax credit for taxes paid to foreign governments. But if that's less than they would've paid to Uncle Sam, they still have to pay the difference here.
That's not true for these overseas subsidiaries. That, as you said, is a major reason these subsidiaries even exist (I'm sure local laws also require them in many cases, but still).
A regular US person gets a US tax credit for taxes paid to foreign governments. But if that's less than they would've paid to Uncle Sam, they still have to pay the difference here.
That's not true for these overseas subsidiaries. That, as you said, is a major reason these subsidiaries even exist (I'm sure local laws also require them in many cases, but still).
The subsidiaries will always exist - most countries require an employer to be a bona fide local legal entity of the right kind; e.g. an American company cannot have an Italian employee; they can have a self-employee Italian contractor, but not an employee - and the laws of “who is an employee” aren’t that simple (even in the US, as you can see in the case of Uber)
And their existence guarantees that tax burden will be optimized globally, rather than locally - the nontrivial price of setting up and running a subsidiary has been paid, so of course it will be used to get benefits as well.
And their existence guarantees that tax burden will be optimized globally, rather than locally - the nontrivial price of setting up and running a subsidiary has been paid, so of course it will be used to get benefits as well.
I think I already acknowledged that local regulations might require a local subsidiary. It's the different tax regime for these subsidiaries (i.e. there's no "pay Uncle Sam the difference between the local corporate tax rate and the US corporate tax rate") vs for individuals, that I'm objecting to.
If those represent major complexities maybe there can be open source tax software that serves 80% of people, I.e. people in coastal cities that have one job, and then the remaining 20% have to pay for their software?
So sure. You can write software that can handle a simple Federal-only case. (Basically what used to be a 1040-EZ: W-2(s), a couple 1099s with all the cost basis info existing, standard deductions, etc.) But, at that point, your taxes are pretty simple to fill out anyway and I'm guessing there are even spreadsheet templates out there that let you type in some numbers and everything is calculated.
Moreover, the simple cases are also supported by the IRS free fillable forms product. https://www.freefilefillableforms.com/
Note that this isn't "the IRS." It's an IRS public-private partnership that people below some income threshold can use for free.
No, it’s usable by any income level. You’re thinking of Free File, which lets lower income users use TurboTax and other products for free.
https://www.irs.gov/e-file-providers/free-file-fillable-form...
> Free File Fillable Forms is the only IRS Free File option available for taxpayers whose income (AGI) is greater than $72,000. Taxpayers whose income is $72,000 or less qualify for IRS Free File partner offers, which can guide you through the preparation and filing of your tax return, and may include state tax filing.
https://www.irs.gov/e-file-providers/free-file-fillable-form...
> Free File Fillable Forms is the only IRS Free File option available for taxpayers whose income (AGI) is greater than $72,000. Taxpayers whose income is $72,000 or less qualify for IRS Free File partner offers, which can guide you through the preparation and filing of your tax return, and may include state tax filing.
Yes. I misread. Though it's understandable how one could confuse Free File Fillable Forms eith IRS Free File partner offers.
As a comment upthread said. It's presumably legit because it's linked to from the IRS site but almost everything else sets off alarms.
As a comment upthread said. It's presumably legit because it's linked to from the IRS site but almost everything else sets off alarms.
The IRS could not come up with a website and TLD that sounds more like a scam if they tried. :)
Yes, although you can get to it directly from the irs.gov site it does seem confusing at first that it’s on a .com
https://www.irs.gov/e-file-providers/free-file-fillable-form...
https://www.irs.gov/e-file-providers/free-file-fillable-form...
My experience of state taxes over 32 years (WA, PA and NM) has been that filing these returns is easy-peasy compared to my federal return (I'm self-employed).
I'd be happy to have a full federal filing system even if it left me to do my state taxes "by hand".
I'd be happy to have a full federal filing system even if it left me to do my state taxes "by hand".
> My experience of state taxes over 32 years (WA, PA and NM)
One of those states (WA) doesn’t belong in the list of states that require personal income tax returns, unless you mean something else?
One of those states (WA) doesn’t belong in the list of states that require personal income tax returns, unless you mean something else?
It's been 24 years since I was in WA :) I forgot they had no income tax. Sorry.
There certainly can be if you want to develop and maintain it.
This is great. Do most French people need to file tax returns? When I lived in Britain I only needed to file when I was self-employed and when I worked in Norway I got sent a pre-filled tax return. Now living in the US I need to file every year (both state and federally) even as a regular employee with all my income reported already reported to the government.
It all seems to be an absurd charade. Attempts to reduce the bureaucratic burden are opposed by the tax return return companies who bribe heavily to prevent any simplification.
It all seems to be an absurd charade. Attempts to reduce the bureaucratic burden are opposed by the tax return return companies who bribe heavily to prevent any simplification.
It's true that tax filing companies lobby to prevent improvements to the tax filing system in the US, but this is also aided by political parties that argue against things like taxation in the first place, which is why there is no bipartisan support to address this issue.
Keeping taxes hard to pay is an important carrot in keeping the public mad about having to pay them in the first place. It's governance through dark patterns.
Keeping taxes hard to pay is an important carrot in keeping the public mad about having to pay them in the first place. It's governance through dark patterns.
> Keeping taxes hard to pay is an important carrot in keeping the public mad about having to pay them in the first place. It's governance through dark patterns.
I am pretty sure the reason most people are mad about having to pay taxes is the thousands/tens of thousands/hundreds of thousands of dollars of their income that is taken from them.
On the high level, I always felt fortunate that I was in position to have to pay a lot of taxes. But it's pretty ridiculous. Case in point, we just bought a small, 100 year old house on a tiny lot. New York State didn't hesitate charging us a "mansion tax" on it. Believe me, it's no mansion. While there's a limit to how mad I am about that, it's not the paperwork that's annoying me.
I am pretty sure the reason most people are mad about having to pay taxes is the thousands/tens of thousands/hundreds of thousands of dollars of their income that is taken from them.
On the high level, I always felt fortunate that I was in position to have to pay a lot of taxes. But it's pretty ridiculous. Case in point, we just bought a small, 100 year old house on a tiny lot. New York State didn't hesitate charging us a "mansion tax" on it. Believe me, it's no mansion. While there's a limit to how mad I am about that, it's not the paperwork that's annoying me.
> income that is taken from them.
Taxation exists in every functional modern democracy and there are no viable alternatives to it. States and municipalities that reduce their revenues through tax cuts wind up relying on things like speeding citations and civil forfeiture to bridge the gap. Wouldn't you rather suck it up and pay once per year than potentially having assets seized by a random cop that you then have to go through the legal system in order to get back? You're gonna pay either way. Even in anti-tax states like Texas, people get hit with massive property tax bills because it's one of the only ways that the government generates revenue.
The real problem is that the vast majority of people don't really care once the money leaves their hands. You don't like the mansion tax, which makes sense, but have you taken the time to look at your state or city budget to see where all of this money is disappearing to? Because that's where the more of the focus needs to be. Just glancing at the executive summary of the latest NY budget(0), it looks like $86B of the $212B total goes towards Medicaid alone.
So do we just leave the poor to not have healthcare? Why does healthcare cost so much and how come despite all of these tech entrants into the healthcare space, the cost never seems to go down? I really hope for the sake of your own argument that you don't work in healthcare, because what that industry is doing to communities across the nation in terms of cost is nothing short of outrageous.
[0] https://www.osc.state.ny.us/reports/budget/review-enacted-bu...
Taxation exists in every functional modern democracy and there are no viable alternatives to it. States and municipalities that reduce their revenues through tax cuts wind up relying on things like speeding citations and civil forfeiture to bridge the gap. Wouldn't you rather suck it up and pay once per year than potentially having assets seized by a random cop that you then have to go through the legal system in order to get back? You're gonna pay either way. Even in anti-tax states like Texas, people get hit with massive property tax bills because it's one of the only ways that the government generates revenue.
The real problem is that the vast majority of people don't really care once the money leaves their hands. You don't like the mansion tax, which makes sense, but have you taken the time to look at your state or city budget to see where all of this money is disappearing to? Because that's where the more of the focus needs to be. Just glancing at the executive summary of the latest NY budget(0), it looks like $86B of the $212B total goes towards Medicaid alone.
So do we just leave the poor to not have healthcare? Why does healthcare cost so much and how come despite all of these tech entrants into the healthcare space, the cost never seems to go down? I really hope for the sake of your own argument that you don't work in healthcare, because what that industry is doing to communities across the nation in terms of cost is nothing short of outrageous.
[0] https://www.osc.state.ny.us/reports/budget/review-enacted-bu...
> I am pretty sure the reason most people are mad about having to pay taxes is the thousands/tens of thousands/hundreds of thousands of dollars of their income that is taken from them.
Perhaps this depends. In the USA, perhaps. In Iceland, not so much (https://twitter.com/iamharaldur/status/1355490017288867841).
In the USA you have to pay your taxes and then you have to pay for your public insurances, where in most of Europe these are the same things. And perhaps tax payers in the USA are not happy with this. So to amend your statement, perhaps a more accurate one is: Most people are mad about paying taxes because of the thousands of dollars of income that is taken from them without any tangible benefits.
Perhaps this depends. In the USA, perhaps. In Iceland, not so much (https://twitter.com/iamharaldur/status/1355490017288867841).
In the USA you have to pay your taxes and then you have to pay for your public insurances, where in most of Europe these are the same things. And perhaps tax payers in the USA are not happy with this. So to amend your statement, perhaps a more accurate one is: Most people are mad about paying taxes because of the thousands of dollars of income that is taken from them without any tangible benefits.
I bet if high taxes for high level of public service can work anywhere, Iceland is it. The population is small (350,000 people) and highly homogeneous. One Icelander is similar to another so problems are more common.
US is vastly larger. New York City alone has 3X as many public school students as Iceland has people. We are vastly diverse ethnically, culturally and geographically. It is much harder to find "problems and solutions everyone agrees to" in the US than in Iceland.
US is vastly larger. New York City alone has 3X as many public school students as Iceland has people. We are vastly diverse ethnically, culturally and geographically. It is much harder to find "problems and solutions everyone agrees to" in the US than in Iceland.
That is hardly it... The US population largely agrees that the military budged is way too bloated, that infrastructure spending is way to low, and there is a general lack of a single payer health care system and tuition free public schools.
I’m sure you’ll find way more happiness towards paying taxes in the UK and China then in the USA despite being as diverse and even larger then the USA.
I’m sure you’ll find way more happiness towards paying taxes in the UK and China then in the USA despite being as diverse and even larger then the USA.
If they were easy to pay, hard for wealthy taxpayers/corporations to avoid, and actually went to services you'd expect in a developed industrial society (healthcare, education, research) instead of Raytheon XJ-9 Knife Missiles(tm) people might not be so salty about paying the 4th lowest tax rate (as a % of GDP) in the OECD
Put another way, we are at the lowest tax rate this country has seen in a century. How much lower can we expect it to drop?
Put another way, we are at the lowest tax rate this country has seen in a century. How much lower can we expect it to drop?
If you are an employee, usually you just have to approve it on the internet, since it's taken directly, every month, from your salary.
Even as a freelancer, it usually takes me 10 minutes on the web to fill my yearly taxes nowaday. It used to be way longer, with queue at the tax offices, real papers to fill, etc.
But I do have a very convenient status, administrative wise.
Even as a freelancer, it usually takes me 10 minutes on the web to fill my yearly taxes nowaday. It used to be way longer, with queue at the tax offices, real papers to fill, etc.
But I do have a very convenient status, administrative wise.
I don't understand how "not having to file a tax return" can work. How does it account for all the information a government might not reasonably have about your wealth and economic activities? How do you apply for tax credits?
The taxation system is not particularly intricate here in Switzerland but there's absolutely no way a government that is not an orwelian surveillance state would have the required information about each person to pre-file their tax return.
In both the US and UK employers have to report earnings and banks / brokers have to report interest and investment income to the IRS/HMRC. Do the Swiss tax authorities trust citizens to correctly report their own income without any verification?
In the UK the government communicates your tax code to your employer payroll department to tell them how much tax to withhold on your earnings (taking account of tax credits etc.) Banks have to withhold the basic rate of tax (higher rate tax payers must file, but that already excludes 90% of tax payers from worrying about it.)
In the US the system seems similar except the government doesn't let your employer know how much tax to withhold so you fill in a form for your employer with the information that gets it mostly but not quite right (so long as you don't switch jobs that year!) Filing taxes as a regular employee ends up being substantially more complex than filing taxes as a self-employed person in the UK where the government provides an online system much simpler than that provided by the tax filing companies in the US (otherwise print and mail several different PDF forms and do the math yourself, fortunately if you get it wrong the IRS already knows what you owe so at that point they'll just point out the corrections and tell you what you owe...) And this beurocracy is of course all doubled because states have their own completely separate set of rules.
In the UK the government communicates your tax code to your employer payroll department to tell them how much tax to withhold on your earnings (taking account of tax credits etc.) Banks have to withhold the basic rate of tax (higher rate tax payers must file, but that already excludes 90% of tax payers from worrying about it.)
In the US the system seems similar except the government doesn't let your employer know how much tax to withhold so you fill in a form for your employer with the information that gets it mostly but not quite right (so long as you don't switch jobs that year!) Filing taxes as a regular employee ends up being substantially more complex than filing taxes as a self-employed person in the UK where the government provides an online system much simpler than that provided by the tax filing companies in the US (otherwise print and mail several different PDF forms and do the math yourself, fortunately if you get it wrong the IRS already knows what you owe so at that point they'll just point out the corrections and tell you what you owe...) And this beurocracy is of course all doubled because states have their own completely separate set of rules.
French people have to file tax returns, it is pre-filled but you still need to check and sign it. It is also the simplest case.
French tax law is actually very complicated, I guess like just about everywhere. If your only revenue is your salary, and you don't have a lot of deductibles, all you need to do is sign the form (electronically). But if you are self-employed, it is highly recommended to hire an accountant if you don't want nasty surprises if you get audited.
French tax law is actually very complicated, I guess like just about everywhere. If your only revenue is your salary, and you don't have a lot of deductibles, all you need to do is sign the form (electronically). But if you are self-employed, it is highly recommended to hire an accountant if you don't want nasty surprises if you get audited.
In Algeria, we have "retenue à la source". Taxes are withheld and paid by the company on behalf of the employee, so you don't need to do any taxes. The company takes care of social Security payment and taxes, and it appears in the tax returns of the company, and the employee's pay stubs. The organization's accountant or accounting firm takes care of it.
You don't interact with the revenue service as an employee, or fill out forms, or something.
You don't interact with the revenue service as an employee, or fill out forms, or something.
In the U.S. this "withholding" happens as well. Regular employee paychecks already lose a chunk of nominal income attributed to various buckets, federal and state and maybe local level. Toward the beginning of the next year comes the grand reconciliation though, where what you "really owe" gets computed, only roughly matching what already is withheld. There are so many rules, exclusions, exceptions, additions. They individually make some sense, or did at some point, but are very confusing, with implications that sometimes stretch over many years.
The US uses its tax code(s) to try to implement policy. Increase taxes on something to try to discourage people from using/buying/participating in it. Decrease taxes or offer tax credits to try to encourage something. On the face of it, this is not a bad idea, but cumulatively it gets pretty messy (especially when, as you note, some of the policy-as-tax-code has implications over more than just a single tax year).
>some of the policy-as-tax-code has implications over more than just a single tax year
Yes, as my finance professor used to say, make all of your decisions based on after-tax.
Which is very relevant on a personal level to, say, someone buying a house in the US with a sufficiently large mortgage to itemize deductions is going to be... unhappy if that deduction suddenly gets snatched away.
"Rules" obviously do change but there are good reasons to exercise restraint with respect to established rules that led individuals to make substantial commitments on the basis of that rule.
Yes, as my finance professor used to say, make all of your decisions based on after-tax.
Which is very relevant on a personal level to, say, someone buying a house in the US with a sufficiently large mortgage to itemize deductions is going to be... unhappy if that deduction suddenly gets snatched away.
"Rules" obviously do change but there are good reasons to exercise restraint with respect to established rules that led individuals to make substantial commitments on the basis of that rule.
You're not wrong with this take. One of the biggest policies is encouraging having children through all the various credits and writeoffs you can do with having children.
French employees also get a pre-filled tax return, they just need to check that it is correct.
Disruption could also come from tax reform. Some countries don't make you figure out things on your own: That's a bit like making a shopper put in the correct prices on each item they're buying and penalizing then for mistakes. A "Price is Right" game-show version of a tax filing system.
Some other countries just tell you where you stand because for the vast majority of people a standard filing is all that's required. In those circumstances, only the edge cases need to deal with complexities. In the US, everyone does.
But I am of course pessimistic on tax reform since that general populace just accepts "oh yeah filing taxes sucks" at the same time that tax service providers lobby congress who, absent a strong outcry from their voters, just follow the corporate money trail.
Some other countries just tell you where you stand because for the vast majority of people a standard filing is all that's required. In those circumstances, only the edge cases need to deal with complexities. In the US, everyone does.
But I am of course pessimistic on tax reform since that general populace just accepts "oh yeah filing taxes sucks" at the same time that tax service providers lobby congress who, absent a strong outcry from their voters, just follow the corporate money trail.
>>Disruption could also come from tax reform.
I'd say that's the most appropriate place, really. It's a designed system, sort of. It's malleable, in that changes occur regularly. The obvious place for bug fixes is here.
I get your pessimism in the sense that the same dynamics, politics and systems that have shaped the present problem seem unlikely to have the desire/capability to fix it. OTOH, things stay the same until they don't. There have been a lot of tax systems invented over the last N thousand years. 99.N% of those tax codes are currently extinct.
Also... we're due a shift of reigning economic religion, periodically speaking. Maybe the next one will take a differing view on efficiency.
Stuff like taxes were always enigmas productivity-wise. For a mill, product-out/labour-in = labour productivity... or product-out/capital for capital efficiency. Either way, efficiency is self evident. For a tax code, legal system or whatnot, there's no way to measure output and no "economists agree" way to know the value of the output even if you could. It could be negative.
Well... This now also applies also to JPMorgan, Pfizer, Alphabet, FB and such. Just like it's not obvious that more legal procedures = more justice, measurements of most of the economy's output is increasingly ethereal and unrelated to obvious scarcities.
That don't mean nothing definite, but we are in times of change... which means don't bet on long term saminess of most things.
I'd say that's the most appropriate place, really. It's a designed system, sort of. It's malleable, in that changes occur regularly. The obvious place for bug fixes is here.
I get your pessimism in the sense that the same dynamics, politics and systems that have shaped the present problem seem unlikely to have the desire/capability to fix it. OTOH, things stay the same until they don't. There have been a lot of tax systems invented over the last N thousand years. 99.N% of those tax codes are currently extinct.
Also... we're due a shift of reigning economic religion, periodically speaking. Maybe the next one will take a differing view on efficiency.
Stuff like taxes were always enigmas productivity-wise. For a mill, product-out/labour-in = labour productivity... or product-out/capital for capital efficiency. Either way, efficiency is self evident. For a tax code, legal system or whatnot, there's no way to measure output and no "economists agree" way to know the value of the output even if you could. It could be negative.
Well... This now also applies also to JPMorgan, Pfizer, Alphabet, FB and such. Just like it's not obvious that more legal procedures = more justice, measurements of most of the economy's output is increasingly ethereal and unrelated to obvious scarcities.
That don't mean nothing definite, but we are in times of change... which means don't bet on long term saminess of most things.
Couldn't agree more. We need tax reform, not software. The returns should be file automatically, if we disagree we can fill out paperwork with what we should be getting.
Roughly 7% of the US population is self-employed (a little over 10 million people).
It's not clear to me what "the returns should be file[d] automatically" means for this group of people.
In addition, there are many non-employment based events in the US tax code that change your tax liability. Last year I received a roughly US$3k tax credit because I installed a 6.6kW solar PV array on my house. There are dozens or even hundreds of cases like this in the US tax code.
It's not clear to me what "the returns should be file[d] automatically" means for this group of people.
In addition, there are many non-employment based events in the US tax code that change your tax liability. Last year I received a roughly US$3k tax credit because I installed a 6.6kW solar PV array on my house. There are dozens or even hundreds of cases like this in the US tax code.
> It's not clear to me what "the returns should be file[d] automatically" means for [the self-employed].
The employer files the income forms and handles withholding. If you're self-employed, that means you are responsible for that part. And of course anyone with more complex taxes (e.g. non-W2 income) would still need to file, though they could start with the pre-filled forms.
> Last year I received a roughly US$3k tax credit because I installed a 6.6kW solar PV array on my house. There are dozens or even hundreds of cases like this in the US tax code.
Yes, and all those special cases should be removed as part of the reform. If they want to hand out money as an incentive for installing a PV system (for example) then they should make that a separate application and payment, since this has nothing to do with collecting taxes. For business income you can subtract legitimate business expenses (since this is about income, not gross revenues), for capital gains you obviously subtract the cost basis, and for personal income you subtract the official poverty level for your household. (If there are multiple filers for one household then they split the deduction.) If the sum is less than zero then you simply pay no taxes—there are no refunds. That's it. No special surtaxes or exclusions. Apply a flat percentage to the total and you're done.
The employer files the income forms and handles withholding. If you're self-employed, that means you are responsible for that part. And of course anyone with more complex taxes (e.g. non-W2 income) would still need to file, though they could start with the pre-filled forms.
> Last year I received a roughly US$3k tax credit because I installed a 6.6kW solar PV array on my house. There are dozens or even hundreds of cases like this in the US tax code.
Yes, and all those special cases should be removed as part of the reform. If they want to hand out money as an incentive for installing a PV system (for example) then they should make that a separate application and payment, since this has nothing to do with collecting taxes. For business income you can subtract legitimate business expenses (since this is about income, not gross revenues), for capital gains you obviously subtract the cost basis, and for personal income you subtract the official poverty level for your household. (If there are multiple filers for one household then they split the deduction.) If the sum is less than zero then you simply pay no taxes—there are no refunds. That's it. No special surtaxes or exclusions. Apply a flat percentage to the total and you're done.
I agree absolutely [0]. This would fundamentally upend American policy making, but that's OK. Our elected representatives would have to decide to actively people money for doing things they want to promote rather, which would improve the transparency of legislative goal setting.
[0] I don't agree about the flat percentage. The USA has had a progressive tax structure in various ways since its founding, and given the concept of marginal utility, I stronly believe that this is the right way to tax income.
[0] I don't agree about the flat percentage. The USA has had a progressive tax structure in various ways since its founding, and given the concept of marginal utility, I stronly believe that this is the right way to tax income.
> The USA has had a progressive tax structure in various ways since its founding…
The system I described is still modestly "progressive" in the sense that those with more earnings pay a larger percentage than those with less, due to subtracting the poverty level. (Up to the poverty level, nothing is taxed; at 2X the poverty level, only half your total earnings are taxed; etc.) It starts at 0% and asymptotically approaches the flat rate as earnings increase. To be sure, it's not quite so heavily biased as the current tax tables, but then we also have this principle that the law is supposed to apply equally to everyone and not discriminate on the basis of wealth or status, in either direction. The current political environment targeting a small number of individuals for special taxes or punitive rates based on either their income or wealth practically amounts to a bill of attainder–which would obviously be unconstitutional, and for good reason.
The system I described is still modestly "progressive" in the sense that those with more earnings pay a larger percentage than those with less, due to subtracting the poverty level. (Up to the poverty level, nothing is taxed; at 2X the poverty level, only half your total earnings are taxed; etc.) It starts at 0% and asymptotically approaches the flat rate as earnings increase. To be sure, it's not quite so heavily biased as the current tax tables, but then we also have this principle that the law is supposed to apply equally to everyone and not discriminate on the basis of wealth or status, in either direction. The current political environment targeting a small number of individuals for special taxes or punitive rates based on either their income or wealth practically amounts to a bill of attainder–which would obviously be unconstitutional, and for good reason.
The concept of marginal utility says that taking different amounts from people with different levels of income/wealth is treating them the same.
To a person who earns $10k/yr, $1k is huge (whether it is extra income or owed tax). To a person who earns $1M/yr, $1k is basically pocket change. The utility of that marginal $1k varies for them both. Ergo, to treat them equally, we tax them differently.
To a person who earns $10k/yr, $1k is huge (whether it is extra income or owed tax). To a person who earns $1M/yr, $1k is basically pocket change. The utility of that marginal $1k varies for them both. Ergo, to treat them equally, we tax them differently.
> The concept of marginal utility says that taking different amounts from people with different levels of income/wealth is treating them the same.
Marginal utility says that—most of the time–the utility of one more of an item to the owner is less than or equal to the utility of each item they already possess. (The exception would be where you need multiple items to do anything useful, but this is generally treated as a different kind of good rather than another of the same.) The concept of marginal utility says nothing about the relative utility of the same amount of money to different people. Utility is subjective, and there is no coherent concept of utility which applies across multiple individuals. It makes zero sense to say that some set amount of money is worth objectively more or less to different individuals based solely on how much they already own, much less on their earnings for a single year.
> To a person who earns $[X]/yr…
And here we have another issue: the assumption that earning some amount in one year—which is all the tax rules consider—is equivalent to earning that amount every year. Receiving ten years worth of income as a lump sum of $1M up front vs. $100k each year should not affect your tax rate, but in practice it does, which has various perverse implications. The law is biased in favor of regular, even income (W-2s), and against situations where you may earn a lot in one year and very little in others (e.g. running a small business).
Marginal utility says that—most of the time–the utility of one more of an item to the owner is less than or equal to the utility of each item they already possess. (The exception would be where you need multiple items to do anything useful, but this is generally treated as a different kind of good rather than another of the same.) The concept of marginal utility says nothing about the relative utility of the same amount of money to different people. Utility is subjective, and there is no coherent concept of utility which applies across multiple individuals. It makes zero sense to say that some set amount of money is worth objectively more or less to different individuals based solely on how much they already own, much less on their earnings for a single year.
> To a person who earns $[X]/yr…
And here we have another issue: the assumption that earning some amount in one year—which is all the tax rules consider—is equivalent to earning that amount every year. Receiving ten years worth of income as a lump sum of $1M up front vs. $100k each year should not affect your tax rate, but in practice it does, which has various perverse implications. The law is biased in favor of regular, even income (W-2s), and against situations where you may earn a lot in one year and very little in others (e.g. running a small business).
> It makes zero sense to say that some set amount of money is worth objectively more or less ...
I think this is nonsense. We can't put a precise worth on it for different people, sure. But I think it's indisputable that there's a curve, we know it's rough shape, and that it's a reflection of marginal utility. The lack of labels or positions on the axes doesn't make that graph useless.
> The concept of marginal utility says nothing about the relative utility of the same amount of money to different people.
Sorry, but this is just completely wrong. Here's the most relevant paragraph from: https://commons.lib.niu.edu/bitstream/handle/10843/22650/12-...
>The linchpin of The Uneasy Case is its rejection of the principle that income has diminishing marginal utility.' Diminishing marginal utility of income (DMUI) means that the greater a taxpayer's income, the less an additional dollar of income is worth to him. If DMUI holds, the government exacts a lesser sacrifice from a higher-income taxpayer, with each dollar taxed, than from a lower-income taxpayer. Moreover, any redistribution of income from a higher-income tax- payer to a lower-income taxpayer tends to increase aggregate welfare: The lower-income taxpayer derives greater utility from each dollar gained than 4 the higher-income taxpayer derives from each dollar surrendered.
Now, to be fair, there are arguments against the DMUI case for progressive taxation. For example, here's Donald Boudreaux writing for the American Institute of Economic Research:
https://www.aier.org/article/rich-man-poor-man-comparing-the...
The fact that it's a terrible argument doesn't diminish the fact that it clearly recognizes that there is a case to be made for progressive taxation based on DMUI.
Here's another one, equally bad:
https://www.econlib.org/archives/2011/04/the_uneasy_case.htm...
The key point here seems to be that even though DMUI is true, we don't know the actual numbers, and thus we should not act on it.
As for your remarks about $1M in 1yr vs $100k for 10yrs ... well, sure the tax code is necessarily imperfect. Optimize it for people with one income patterns and you've made it worse for people with a different income pattern. Such is life ... perfection is not an option here.
I think this is nonsense. We can't put a precise worth on it for different people, sure. But I think it's indisputable that there's a curve, we know it's rough shape, and that it's a reflection of marginal utility. The lack of labels or positions on the axes doesn't make that graph useless.
> The concept of marginal utility says nothing about the relative utility of the same amount of money to different people.
Sorry, but this is just completely wrong. Here's the most relevant paragraph from: https://commons.lib.niu.edu/bitstream/handle/10843/22650/12-...
>The linchpin of The Uneasy Case is its rejection of the principle that income has diminishing marginal utility.' Diminishing marginal utility of income (DMUI) means that the greater a taxpayer's income, the less an additional dollar of income is worth to him. If DMUI holds, the government exacts a lesser sacrifice from a higher-income taxpayer, with each dollar taxed, than from a lower-income taxpayer. Moreover, any redistribution of income from a higher-income tax- payer to a lower-income taxpayer tends to increase aggregate welfare: The lower-income taxpayer derives greater utility from each dollar gained than 4 the higher-income taxpayer derives from each dollar surrendered.
Now, to be fair, there are arguments against the DMUI case for progressive taxation. For example, here's Donald Boudreaux writing for the American Institute of Economic Research:
https://www.aier.org/article/rich-man-poor-man-comparing-the...
The fact that it's a terrible argument doesn't diminish the fact that it clearly recognizes that there is a case to be made for progressive taxation based on DMUI.
Here's another one, equally bad:
https://www.econlib.org/archives/2011/04/the_uneasy_case.htm...
The key point here seems to be that even though DMUI is true, we don't know the actual numbers, and thus we should not act on it.
As for your remarks about $1M in 1yr vs $100k for 10yrs ... well, sure the tax code is necessarily imperfect. Optimize it for people with one income patterns and you've made it worse for people with a different income pattern. Such is life ... perfection is not an option here.
> We can't put a precise worth on it for different people, sure. But I think it's indisputable that there's a curve, we know it's rough shape, and that it's a reflection of marginal utility.
There is indeed a curve, and we do know its rough shape (it's nonincreasing). But that curve is for one individual. Utility is not an objective measure. Every individual has their own "unit" of utility and there is no conversion factor which would allow utility to be summed or compared across multiple individuals.
This is heresy to utilitarians, to be sure. How are you supposed to implement policies which ensure the greatest benefit for the greatest number if you can't calculate a collective utility score? That doesn't bother me, though, since I'm not a utilitarian. So far as I'm concerned the utilitarians are just implementing policies based on their own preferences and ignoring what anyone else actually wants.
> Diminishing marginal utility of income (DMUI) means that the greater a taxpayer's income, the less an additional dollar of income is worth to him.
This is a fairly standard description of the concept of marginal utility, aside from the fact that it's confusing income and wealth. (The greater one's wealth the less each additional dollar is worth. Income is irrelevant except as a poor proxy for wealth.)
Note that it only talks about one person. As I acquire more wealth I'm less and less willing to put in the same effort / pay the same cost to acquire each additional dollar. No issues there, this is not particularly controversial.
> If DMUI holds, the government exacts a lesser sacrifice from a higher-income taxpayer, with each dollar taxed, than from a lower-income taxpayer.
And here they make an extraordinary leap from talking about one individual's marginal utility to comparing the "sacrifice" (lost utility) of multiple individuals. They're making the assumption that all individuals have exactly the same utility scale, which is manifestly false. Everyone has their own utility scale, which varies over time and is in general unknowable, even to them, except as it is partially revealed through their actions. It can readily be observed, however, that a dollar of additional income does not have the same utility to two different people with the same wealth: For any given level of wealth, some pursue higher-paying work while others don't consider it worth the effort. Taking some amount of money from the first group represents a larger sacrifice than taking the same amount from the second group, even though their wealth is the same. Since you can't even say that equal wealth results in equal marginal utility, how can you claim that lower or higher wealth (much less income) necessarily implies higher or lower marginal utility? There is absolutely no reason why one person with $1M cannot get the same marginal utility out of an additional dollar—by whatever objective measure you care to name—as someone else with a net worth of $10k.
> … well, sure the tax code is necessarily imperfect.
I'm not asking for perfection. I'm just asking that the law, which is supposed to be just, not discriminate against people based on irrelevant factors such as annual income. The fact that a progressive tax system based on annual income imposes different levels of taxation on two people with the same earnings merely because one received their pay in a lump sum while the other received it in installments is a strong hint that the system is based on unsound principles.
There is indeed a curve, and we do know its rough shape (it's nonincreasing). But that curve is for one individual. Utility is not an objective measure. Every individual has their own "unit" of utility and there is no conversion factor which would allow utility to be summed or compared across multiple individuals.
This is heresy to utilitarians, to be sure. How are you supposed to implement policies which ensure the greatest benefit for the greatest number if you can't calculate a collective utility score? That doesn't bother me, though, since I'm not a utilitarian. So far as I'm concerned the utilitarians are just implementing policies based on their own preferences and ignoring what anyone else actually wants.
> Diminishing marginal utility of income (DMUI) means that the greater a taxpayer's income, the less an additional dollar of income is worth to him.
This is a fairly standard description of the concept of marginal utility, aside from the fact that it's confusing income and wealth. (The greater one's wealth the less each additional dollar is worth. Income is irrelevant except as a poor proxy for wealth.)
Note that it only talks about one person. As I acquire more wealth I'm less and less willing to put in the same effort / pay the same cost to acquire each additional dollar. No issues there, this is not particularly controversial.
> If DMUI holds, the government exacts a lesser sacrifice from a higher-income taxpayer, with each dollar taxed, than from a lower-income taxpayer.
And here they make an extraordinary leap from talking about one individual's marginal utility to comparing the "sacrifice" (lost utility) of multiple individuals. They're making the assumption that all individuals have exactly the same utility scale, which is manifestly false. Everyone has their own utility scale, which varies over time and is in general unknowable, even to them, except as it is partially revealed through their actions. It can readily be observed, however, that a dollar of additional income does not have the same utility to two different people with the same wealth: For any given level of wealth, some pursue higher-paying work while others don't consider it worth the effort. Taking some amount of money from the first group represents a larger sacrifice than taking the same amount from the second group, even though their wealth is the same. Since you can't even say that equal wealth results in equal marginal utility, how can you claim that lower or higher wealth (much less income) necessarily implies higher or lower marginal utility? There is absolutely no reason why one person with $1M cannot get the same marginal utility out of an additional dollar—by whatever objective measure you care to name—as someone else with a net worth of $10k.
> … well, sure the tax code is necessarily imperfect.
I'm not asking for perfection. I'm just asking that the law, which is supposed to be just, not discriminate against people based on irrelevant factors such as annual income. The fact that a progressive tax system based on annual income imposes different levels of taxation on two people with the same earnings merely because one received their pay in a lump sum while the other received it in installments is a strong hint that the system is based on unsound principles.
You're continuing to make out that DMUI is some novel concept that I've just introduced.
This is a standard, widespread concept in economics, even among people who disagree that it should be the basis of the tax code. I am unable to find any mainstream or heterodox economist who disagrees that DMUI is real. The disagreements are about what the implications for taxation (among other things) ought to be.
This is a standard, widespread concept in economics, even among people who disagree that it should be the basis of the tax code. I am unable to find any mainstream or heterodox economist who disagrees that DMUI is real. The disagreements are about what the implications for taxation (among other things) ought to be.
> Some countries don't make you figure out things on your own: That's a bit like making a shopper put in the correct prices on each item they're buying and penalizing then for mistakes. A "Price is Right" game-show version of a tax filing system.
The U.S. doesn't make you do this, either. Most people don't itemize deductions. You just plug in the data from your W-2. The percentage of people itemizing was 30%, but with the Trump Tax Cut which capped state and local deductions (i.e. lowered the maximum allowable deduction, effectively increasing taxes on a large number of people) this was predicted to drop to 10%.
If you're itemizing, you're in a minority of tax payers, and in most cases a voluntary minority seeking to minimize your taxes in a way that simply wouldn't be possible elsewhere.
The U.S. also has one of the highest rates of voluntary tax compliance, and hypothetically that might have something to do with 1) ability to itemize and 2) having to sign on the dotted line every year.
The U.S. doesn't make you do this, either. Most people don't itemize deductions. You just plug in the data from your W-2. The percentage of people itemizing was 30%, but with the Trump Tax Cut which capped state and local deductions (i.e. lowered the maximum allowable deduction, effectively increasing taxes on a large number of people) this was predicted to drop to 10%.
If you're itemizing, you're in a minority of tax payers, and in most cases a voluntary minority seeking to minimize your taxes in a way that simply wouldn't be possible elsewhere.
The U.S. also has one of the highest rates of voluntary tax compliance, and hypothetically that might have something to do with 1) ability to itemize and 2) having to sign on the dotted line every year.
> You just plug in the data from your W-2.
This is still a lot more work than in many countries, and you still need to either fill in a paper 1040 (plus state taxes where appropriate, and some of those (cough CA) are far from simple), use tax prep software, or someone like H&R Block.
In the UK, if you're in the majority of people who have one job and straightforward finances (e.g. not renting property, no CGT, etc) you need to do nothing at all for your taxes. Your employer deducts tax from your wages and that's it. I guess technically you should verify that your "tax code" (the mechanism used to inform employers of what needs withholding) is correct but again, unless your situation is more complex that is a standard figure shared by the rest of the employed workforce.
My parents never filed a return in their entire lives.
This is still a lot more work than in many countries, and you still need to either fill in a paper 1040 (plus state taxes where appropriate, and some of those (cough CA) are far from simple), use tax prep software, or someone like H&R Block.
In the UK, if you're in the majority of people who have one job and straightforward finances (e.g. not renting property, no CGT, etc) you need to do nothing at all for your taxes. Your employer deducts tax from your wages and that's it. I guess technically you should verify that your "tax code" (the mechanism used to inform employers of what needs withholding) is correct but again, unless your situation is more complex that is a standard figure shared by the rest of the employed workforce.
My parents never filed a return in their entire lives.
> This is still a lot more work than in many countries, and you still need to either fill in a paper 1040 (plus state taxes where appropriate, and some of those (cough CA) are far from simple), use tax prep software, or someone like H&R Block.
Not in my experience. The online options the IRS provides free of charge is pretty easy, and many states have similarly simple online forms for free.
https://www.irs.gov/e-file-providers/free-file-fillable-form...
Although I do not dispute other countries do have it easier, and do it better than the US.
Not in my experience. The online options the IRS provides free of charge is pretty easy, and many states have similarly simple online forms for free.
https://www.irs.gov/e-file-providers/free-file-fillable-form...
Although I do not dispute other countries do have it easier, and do it better than the US.
Each country has a different idea of what matters for tax purposes. The IRS doesn’t necessarily have all the information that would be relevant to calculate taxes for most people (you have to include that information when you file, so they are in a position to check). They know your income and could probably figure out other wage-earners in the household based on their addresses. They don’t necessarily know all the people you provided more than 50% of their support for the year, or how much you paid on interest for mortgage payments (assuming you pay a mortgage), or how much you spent on deductible medical expenses, or deductible business expenses, or whether a child was born (presumably you’re paying 50+% of the baby’s expenses) and which month that happened, or whether somebody moved out and you no longer pay 50+% of their support, etc.
The IRS does a terrible job with the information it does have. One year, I had a typo in my daughter’s social security number. The IRS sent me a note that her number didn’t match the previous year’s return. I assume that they believed the previous year’s number was right, but instead of saying “we’ve amended the return by using the social security number that appeared on last year’s return,” they said “we’ve amended the return by removing that dependent and recalculating taxes; if you disagree with your higher bill, you’ll need to send us the following paperwork with the correct social security number” (of course, “correct” meant “the number we already have on file” more or less, but I had to figure out what that number was by looking at my own copy of the previous year’s return). Luckily, the previous year’s number was correct; otherwise I would have had to amend the previous return and then refile the current year’s.
The IRS does a terrible job with the information it does have. One year, I had a typo in my daughter’s social security number. The IRS sent me a note that her number didn’t match the previous year’s return. I assume that they believed the previous year’s number was right, but instead of saying “we’ve amended the return by using the social security number that appeared on last year’s return,” they said “we’ve amended the return by removing that dependent and recalculating taxes; if you disagree with your higher bill, you’ll need to send us the following paperwork with the correct social security number” (of course, “correct” meant “the number we already have on file” more or less, but I had to figure out what that number was by looking at my own copy of the previous year’s return). Luckily, the previous year’s number was correct; otherwise I would have had to amend the previous return and then refile the current year’s.
A lot of this comes from the US aversion to explicitly re-distributive federal policy (i.e. sending people checks), and a preference for implicit mechanisms (i.e. tax credits, refunds and deductions).
and even if you have to fill up a tax return it is very straightforward to do it online.
I am 100% opposed to this model. I am even opposed to Automatic Deductions
People should have some "skin" in the game of taxation, if we allow the process to become seamless overtaxation becomes a real problem.
Even today people do not treat their Gross income as their income, they look at net. This is the wrong way to look at it.
I believe people should have to physically pay the government every month just like you do your water bill, your groceries, etc.
If people had to write a check, or trigger an electronic payment to their local taxing authority every month there would likely be more focus on where that money is going, and why the government things they deserve a huge chunk of my income (hint they do not)
This prevents the government from just raising taxes and hiding these increases.
People should have some "skin" in the game of taxation, if we allow the process to become seamless overtaxation becomes a real problem.
Even today people do not treat their Gross income as their income, they look at net. This is the wrong way to look at it.
I believe people should have to physically pay the government every month just like you do your water bill, your groceries, etc.
If people had to write a check, or trigger an electronic payment to their local taxing authority every month there would likely be more focus on where that money is going, and why the government things they deserve a huge chunk of my income (hint they do not)
This prevents the government from just raising taxes and hiding these increases.
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If their take home goes down because of increased taxation, people will notice.
depends but I would say they would notice less, and would not have as strong reaction to it as they would if they had to write the check themselves.
We have history of this as well in the US, a prime example of this is property taxes. When a state raises the income tax rate there are a few grumbles but hardly anyone actively protests, however if property taxes go up people can be found literately in the street protesting because it causes their mortgage to go up (as most people pay property taxes via escrow with their lender)
This is direct payment of taxes monthly where the person received the money, then has to pay it out, has a vastly different psychological effect than if the money is seized before ever being received by the person
I maintain that the ONLY way the government can get way with the MASSIVE amounts of taxation everyone pays is for 2 primary reasons
1. Distributed collection 2. Automatic Collection
If either was not in place the government would have huge amounts of civil unrest because by an large most people would instantly recognized they are being fleeced by the government no different than a mugger on the street
We have history of this as well in the US, a prime example of this is property taxes. When a state raises the income tax rate there are a few grumbles but hardly anyone actively protests, however if property taxes go up people can be found literately in the street protesting because it causes their mortgage to go up (as most people pay property taxes via escrow with their lender)
This is direct payment of taxes monthly where the person received the money, then has to pay it out, has a vastly different psychological effect than if the money is seized before ever being received by the person
I maintain that the ONLY way the government can get way with the MASSIVE amounts of taxation everyone pays is for 2 primary reasons
1. Distributed collection 2. Automatic Collection
If either was not in place the government would have huge amounts of civil unrest because by an large most people would instantly recognized they are being fleeced by the government no different than a mugger on the street
> You just plug in the data (..)
Here in the Netherlands I don't have to plug in any data, everything is pre-filled. Income, bank accounts, mortgage, advances on deductions, etc. All you have to do is verify it (you can change things if necessary, but I've never had to do that). Takes about five minutes max.
Here in the Netherlands I don't have to plug in any data, everything is pre-filled. Income, bank accounts, mortgage, advances on deductions, etc. All you have to do is verify it (you can change things if necessary, but I've never had to do that). Takes about five minutes max.
Same here in NZ - the main thing that makes it easy is that we have absolutely no deductions, if I have one employer my tax will likely be done perfectly. If I want I can go online with the IRD and fill out my tax form (my W2 equivalents are available), it's probably worth doing if I've had 2 jobs, if I don't the govt will do it for me and send me refund if I have one coming.
I run a small biz, I do PAYE on a simple spreadsheet, then type the results onto an IRD web page, takes me less than 10 minutes a month.
I run a small biz, I do PAYE on a simple spreadsheet, then type the results onto an IRD web page, takes me less than 10 minutes a month.
If that were to happen in America, an entire industry would be put out of business.
Well, individual tax prep is just one arm a much larger accounting industry. Individuals that use an accountant for their taxes probably have more complex situations where the sort of streamlines process we're discussing wouldn't suit their needs. Or they're already buying the upgraded business/home-business version of turbotax for the same reason.
Most people though just use a tax preparer at something like H&R block. A little searching indicates there's roughly 60k to 80k jobs like this in the US, and they earn (at least at H&R Block) about $16 per hour, and only for about 3 months a year. A small # of tax preparers with a bit more training & experience may provide other financial services in the off-season or assist small business with quaterly filings or bookkeeping.
Overall though, you're not talking about much of an industry collapse in terms of people employed. The ones that work in that area year-round will lose some extra hours. The ones that don't, having some experience in finance, might seek further training to get a higher level job of that sort (maybe become an actual accountant) I don't think it should be considered a barrier to ending regulatory capture within this area.
Apart from that, a few software products would collapse, losing most customers, retaining the ones that legitimately needed advanced guidance. And the company would probably have to charge the more for it, and possible compete with actual accountants on price in that respect.
But I don't think "industry collapse" is correct.
Most people though just use a tax preparer at something like H&R block. A little searching indicates there's roughly 60k to 80k jobs like this in the US, and they earn (at least at H&R Block) about $16 per hour, and only for about 3 months a year. A small # of tax preparers with a bit more training & experience may provide other financial services in the off-season or assist small business with quaterly filings or bookkeeping.
Overall though, you're not talking about much of an industry collapse in terms of people employed. The ones that work in that area year-round will lose some extra hours. The ones that don't, having some experience in finance, might seek further training to get a higher level job of that sort (maybe become an actual accountant) I don't think it should be considered a barrier to ending regulatory capture within this area.
Apart from that, a few software products would collapse, losing most customers, retaining the ones that legitimately needed advanced guidance. And the company would probably have to charge the more for it, and possible compete with actual accountants on price in that respect.
But I don't think "industry collapse" is correct.
Sounds like the industry is sustainable only due to it being an industry in the first place. Good riddance.
The vast bulk of the accounting industry (including tax software) is not supported by consumers with very basic taxes taking their paperwork down to the mall or typing some numbers into this year's TurboTax.
So?
Even plugging in your data from a w-2 can be an intimidating process with a a lot of conditionals and a few referals to other forms where you might need to give more information. In turn, those forms may reference still more forms, along with explanatory documents to further define the terms used and provide practical examples. A person may not know that supplemental forms aren't required for their situation until they have gone down that rabbit hole.
As for itemizing, again, you may not know if you should itemize or not until you actually go through the process and see where the numbers fall.
Meanwhile the IRS is held out as a boogey man who will ruin your life financially if you get something wrong.
For most here on HN who deal with interlocking blocks of logic, tech documentation, etc? It's fine, and probably for a plenty of other people too. For a very large number of people though, it's the common paradox that it's only easy once once you already know what you're doing. And for a few weeks/months a year the tax prep industry works hard to convince people it's not something they should try to navigate on their own, and if they do then they're a sucker throwing away refund money because of hidden secret tricks to get more refund money back.
As for itemizing, again, you may not know if you should itemize or not until you actually go through the process and see where the numbers fall.
Meanwhile the IRS is held out as a boogey man who will ruin your life financially if you get something wrong.
For most here on HN who deal with interlocking blocks of logic, tech documentation, etc? It's fine, and probably for a plenty of other people too. For a very large number of people though, it's the common paradox that it's only easy once once you already know what you're doing. And for a few weeks/months a year the tax prep industry works hard to convince people it's not something they should try to navigate on their own, and if they do then they're a sucker throwing away refund money because of hidden secret tricks to get more refund money back.
> The percentage of people itemizing was 30%, but with the Trump Tax Cut which capped state and local deductions (i.e. lowered the maximum allowable deduction, effectively increasing taxes on a large number of people) this was predicted to drop to 10%.
11.4% of tax filers itemized in 2018:
https://www.irs.gov/statistics/soi-tax-stats-tax-stats-at-a-...
11.4% of tax filers itemized in 2018:
https://www.irs.gov/statistics/soi-tax-stats-tax-stats-at-a-...
Funny you should call it the Trump tax cut since mine went up substantially for the reasons you mention.
If it went up for the reasons mentioned, it means that your (previousl) itemized deductions put you in a rather small percentage of Americans. Also an unfortunate group: rich enough to have deductions at this scale, but not rich enough to have wriggled out of a large chunk of tax obligations.
Or it could have been increased taxes due to the cap on SALT exemptions.
The standard deduction went up to $12k. If your SALT exemptions exceed that, you're holding a rather costly mortgage.
LOL, welcome to the Bay Area. It was not what anyone would call a luxury home, a 3 bedroom townhome.
>> I am of course pessimistic on tax reform since that general populace just accepts "oh yeah filing taxes sucks"
That is not the hold back for tax reform, any efforts to simply the tax code gets push back from every special interest that to keep their deductions, and they point to "the others" as "unfair" deductions, so it never changes.
People with kids want to keep the massive deductions for having kids, even though childless people believe that is unfair, people with homes want to keep the deductions for home ownership even though renters believe that is unfair, and so it goes down the line for 1000's and 1000's of loop holes and deductions...
Never a one shall be expunged from the code
That is not the hold back for tax reform, any efforts to simply the tax code gets push back from every special interest that to keep their deductions, and they point to "the others" as "unfair" deductions, so it never changes.
People with kids want to keep the massive deductions for having kids, even though childless people believe that is unfair, people with homes want to keep the deductions for home ownership even though renters believe that is unfair, and so it goes down the line for 1000's and 1000's of loop holes and deductions...
Never a one shall be expunged from the code
Deductions should not exist period. The more transparent way for a government to subsidize something would be to give cash. This would force the government to recognize the costs of the subsidy and who is benefiting from it clearly.
We could evolve to requiring laws to be implemented as FOSS before they go live. I suspect the right tests could reveal all kinds of bugs, weird edge cases and exploits.
Sadly law makers don't know how to code. If they did they would see what bloated monstrosity of complexity a few simple sounding sentences with some simple sounding exceptions produce. Perhaps a large bill and months of delay could provide enough of a clue.
Sadly law makers don't know how to code. If they did they would see what bloated monstrosity of complexity a few simple sounding sentences with some simple sounding exceptions produce. Perhaps a large bill and months of delay could provide enough of a clue.
AFAIU, the French Tax Code is effectively defined in terms of an algorithm. There was a recent HN thread (https://news.ycombinator.com/item?id=25208853) on a new open-source compiler for the tax code (https://arxiv.org/abs/2011.07966). The paper for the compiler references some interesting literature on the computability of legal codes. For example,
> [U.S.] tax law drafting style follows default logic, a non-monotonic logic that is hard to encode in languages with first-order logic (FOL).
> [U.S.] tax law drafting style follows default logic, a non-monotonic logic that is hard to encode in languages with first-order logic (FOL).
Fascinating. I thought Estonia was the only one who kept an eye on difficulty of implementation.
Tax laws are hundreds to thousands of pages each. The complexity is intentional and not accidental. Many carve outs are specifically created for special interest or to target certain constituencies.
Edit: referring to the US
Edit: referring to the US
Funny you mention that, the first time I tried to use Credit Karma Tax, either last year or the year before, they punted on me for having lived in two states.
I agree with your sentiment, but not resolution. The truest resolution is in simplifying the tax code, which Intuit and co do not want.
Edit to add: When CreditKarma gave up on me, I tried FreeTaxUsa. It sounds like a scam I know, but they are top notch, and cheap. Highly recommend.
I agree with your sentiment, but not resolution. The truest resolution is in simplifying the tax code, which Intuit and co do not want.
Edit to add: When CreditKarma gave up on me, I tried FreeTaxUsa. It sounds like a scam I know, but they are top notch, and cheap. Highly recommend.
> Edit to add: When CreditKarma gave up on me, I tried FreeTaxUsa. It sounds like a scam I know, but they are top notch, and cheap. Highly recommend.
Ah! I remember FreeTaxUsa. They have this silly verification thing in their signup. Your email address must be on an "American" domain. Mine is self hosted on some other domain and they literally say it's "foreign". Just checked again and it's still there. Hah... sigh.
Ah! I remember FreeTaxUsa. They have this silly verification thing in their signup. Your email address must be on an "American" domain. Mine is self hosted on some other domain and they literally say it's "foreign". Just checked again and it's still there. Hah... sigh.
did you contact them on that? What does an email prove anyway?
Ah, I just checked my records. I contacted them in 2021-02. Their response was:
> We prefer customers to attach email addresses from widely recognized providers for security purposes. Additionally, our servers have a hard time communicating with private email servers.
> You may create a new email address to handle your tax returns through FreeTaxUSA with a major provider.
> We prefer customers to attach email addresses from widely recognized providers for security purposes. Additionally, our servers have a hard time communicating with private email servers.
> You may create a new email address to handle your tax returns through FreeTaxUSA with a major provider.
thanks for asking them – it's really important to give feedback. Otherwise they just continue to not know.
If getting an email address is too big a barrier for you... you might not be the target market.
Honestly, the best solution for all of this is use the local CPA or Licensed Tax Preparer. No, I don't mean HR Block or chain tax preparers. I have my own and it is the best money spent since my CPA know the state and the federal taxes further than Intuit software (Intuit use dark patterns to take advantage of everything).
> It takes an army to build and maintain
Perfect for open source - if decomposable, so each issue can be dealt with in isolation (or many can). e.g. using a "plug-in" architecture of some kind.
And somehow recruit non-dev folk - if you go to the trouble to understand some specific tax point, you often would like to share it, and also record it in some "easy to use" form, for next time (and a starting point for amendments).
Maybe a "tax DSL", "business rules"? Or a user specs it, and a dev codes it?
Perfect for open source - if decomposable, so each issue can be dealt with in isolation (or many can). e.g. using a "plug-in" architecture of some kind.
And somehow recruit non-dev folk - if you go to the trouble to understand some specific tax point, you often would like to share it, and also record it in some "easy to use" form, for next time (and a starting point for amendments).
Maybe a "tax DSL", "business rules"? Or a user specs it, and a dev codes it?
>Perfect for open source
Not really.
The software as a whole needs to be verified across a wide range of everchanging rules, some of which are going to be a judgement call even among experienced accountants.
Why would people be interested in working on this project? It certainly doesn't break any new ground. It's just a long and ongoing grind to implement tax code rules. If for some reason, I have a lifelong ambition to work on accounting software, I'm sure Intuit, SAP, and Oracle pay reasonably well.
Not really.
The software as a whole needs to be verified across a wide range of everchanging rules, some of which are going to be a judgement call even among experienced accountants.
Why would people be interested in working on this project? It certainly doesn't break any new ground. It's just a long and ongoing grind to implement tax code rules. If for some reason, I have a lifelong ambition to work on accounting software, I'm sure Intuit, SAP, and Oracle pay reasonably well.
You're right about verification, there'd be a lag for changes until they become settled. Some projects do have moving targets - like youtube-dl - but testing is simple, and it's only one thing. (BTW even court tax rulings can have dissenting judges, so some points are real uncertain)
Many popular open source projects began as an open source version of something. e.g. linux. The structure of the software, to facilitate contribution, could break new ground.
I think the most significant and difficult-to-solve barrier is making contributing accessible to non-devs.
Many popular open source projects began as an open source version of something. e.g. linux. The structure of the software, to facilitate contribution, could break new ground.
I think the most significant and difficult-to-solve barrier is making contributing accessible to non-devs.
The German tax system works this way. German authorities specify the rules in a DSL and e.g. https://www.elster.de is generated from them where you can fill out all the tax forms (also e.g. companies). Stuff that they already know can be pre-filled.
Sure it would be great if that was Open Source, but it does its job this way as well?
Sure it would be great if that was Open Source, but it does its job this way as well?
Around 2007-2008, as a "side project" I tried to build a web-based payroll software for a single state. Me and the developer I employed were able to get to 80% real quick, with ACH and everything. But as you say, the final 20% (edge cases) are nearly endless and ever-changing. Even a single state ended up being way too much for two developers.
Way back when I wrote accounting software in the UK. I had a conversation with my boss about us writing our own payroll software so we didn't have to a pay a third party to white label their software.
I then went and found out how many folks one of our competitors (a bit more mass market than us) had writing payroll software.
The answer was it was a six person team just to keep up with the government changes every year. We never bothered any more with that idea.
Payroll is surprisingly hard.
I then went and found out how many folks one of our competitors (a bit more mass market than us) had writing payroll software.
The answer was it was a six person team just to keep up with the government changes every year. We never bothered any more with that idea.
Payroll is surprisingly hard.
I switched payroll providers a few years ago away from Quickbooks Payroll. They hosed up my stuff so bad I was dealing with the fallout for close to 2 years afterwards - overpaid, underpaid, refunds, fines, it was a mess.
The new company I switched to did not allow me to do payroll on the days that I'd wanted. They only offered 2 or 3 options, none of which matched what I'd done before. "That's all we offer" was the reply. There've been a couple other 'restrictions' (lost flexibility) on some behaviors - nothing horrible, of course.
I've no doubt removing some of that flexibility has reduced their overhead - there's enough changing regulations every year in multiple jurisdictions - keeping the main stuff under their control as simple as possible seems to have worked out for them. I've had... 4 years with them without incident, but 2 years of pain with QB before.
FWIW, QB hosed up dealing with my state. Federal was fine, but they created so many problems with my state filings...
The new company I switched to did not allow me to do payroll on the days that I'd wanted. They only offered 2 or 3 options, none of which matched what I'd done before. "That's all we offer" was the reply. There've been a couple other 'restrictions' (lost flexibility) on some behaviors - nothing horrible, of course.
I've no doubt removing some of that flexibility has reduced their overhead - there's enough changing regulations every year in multiple jurisdictions - keeping the main stuff under their control as simple as possible seems to have worked out for them. I've had... 4 years with them without incident, but 2 years of pain with QB before.
FWIW, QB hosed up dealing with my state. Federal was fine, but they created so many problems with my state filings...
I can't believe so many commenters here are crying out for a nannier nanny state where all of their financial transactions are monitored by the government and once a year they have to sign a paper agreeing that the government has watched them correctly.
That flies in hte face of the usual comment torrent decrying centralized spying from any agency, government or otherwise.
In the 40 or so years I have been doing taxes I have not once seen the amount deducted as taxes match the amount owed. After various deductions (retirement savings, medical expenses, charitable donations, political contributions, governmental program incentives, etc) and jurisdictional disagreements (employer in one province, residence in another), I and those I do taxes for always get money coming back.
Requiring every financial (and otherwise) transaction I undertake to be registered with some central government authority to they can (in theory) correctly prefill my tax forms is anathema. Be careful what you wish for you might just get it.
That flies in hte face of the usual comment torrent decrying centralized spying from any agency, government or otherwise.
In the 40 or so years I have been doing taxes I have not once seen the amount deducted as taxes match the amount owed. After various deductions (retirement savings, medical expenses, charitable donations, political contributions, governmental program incentives, etc) and jurisdictional disagreements (employer in one province, residence in another), I and those I do taxes for always get money coming back.
Requiring every financial (and otherwise) transaction I undertake to be registered with some central government authority to they can (in theory) correctly prefill my tax forms is anathema. Be careful what you wish for you might just get it.
Nobody here is asking for that.
I don't know if you're just not aware of this, or what, but most of the data on your taxes is stuff that already gets reported to the government. There's no reason for consumers to fill out a W2 every year, the government as it exists today already has that data. The same is the case for a lot of investment information, it already gets reported to the IRS today.
You don't need to build an expanded government surveillance program for the IRS to stop requiring filers to fill in information that the government already has. This has nothing to do with having a "nanny state", and everything to do with a coordinated campaign from bad-faith actors like Intuit to try and pretend that it's pro-freedom or pro-privacy or some crud to act like the government doesn't already have your W2.
I don't know if you're just not aware of this, or what, but most of the data on your taxes is stuff that already gets reported to the government. There's no reason for consumers to fill out a W2 every year, the government as it exists today already has that data. The same is the case for a lot of investment information, it already gets reported to the IRS today.
You don't need to build an expanded government surveillance program for the IRS to stop requiring filers to fill in information that the government already has. This has nothing to do with having a "nanny state", and everything to do with a coordinated campaign from bad-faith actors like Intuit to try and pretend that it's pro-freedom or pro-privacy or some crud to act like the government doesn't already have your W2.
The IRS already gets this information. They'll get even more with the changes to 1099-k reporting for transactions made next year.
I feel like this is a kind of XY problem that could be solved theoretically by agreeing on a more streamlined tax-regulation.
It will take away the ability to fine tune tax deducts and so forth, but in return we can more easily design software to handle our taxes.
I find that not having this automated nowadays with the advancement in computing resources that we have at disposal today is surprising.
Or you could just have the government itself develop the software in tandem with the tax regulations. Obviously, even that would still be easier and cheaper with a less complex tax code, but in this thread we're talking about "open source tax software" that shouldn't even really need to exist when the government could just provide a fully functional web portal where the corner cases have been tested exhaustively by the organisation that knows those corner cases better than anyone.
This has to be the most sensible thing. The UK used to say that "tax doesn't have to be taxing", very pithy but then I tried to make a zero return for a dormant company and had to use some horrific software from the HMRC (tax office), which was some weird XML thing that was impossible to understand.
If the government had to make the software we all had to use, as well as it being free, it would force the government to consider the cost of modifications when they decide in their infinite wisdom that some new tax-break should be created.
Inertia can be good to slow-down knee-jerk politics.
If the government had to make the software we all had to use, as well as it being free, it would force the government to consider the cost of modifications when they decide in their infinite wisdom that some new tax-break should be created.
Inertia can be good to slow-down knee-jerk politics.
Yes, software can be much simpler if the real world wasn't so complex.
The reality is that governments use taxation as one of their tools to reward certain behaviors and population segments and to discourage/punish others. Simplifying taxation is taking that power away from governments. Why would any government choose to divest itself of those powers?
The reality is that governments use taxation as one of their tools to reward certain behaviors and population segments and to discourage/punish others. Simplifying taxation is taking that power away from governments. Why would any government choose to divest itself of those powers?
I don't think any other country does taxes as awfully as the US. Where I live, there's a government provided portal that has most of the stuff already filled from my employer. It gets "complicated" if I earn income from the side such as investments, contract work etc and even that is just a matter of filling forms on their website in a similar manner to how the author suggests filling fields in an Excel sheet and other fields get the values automatically calculated. If I have refunds pending, I pay nothing. If I have taxes to pay, it redirects to my bank, I pay my taxes and I'm done
Sure, but the US also generates about 40% of it's income from personal income taxes, compared to ~25% average across OECD
https://files.taxfoundation.org/20210217111150/Sources-of-ta... from https://taxfoundation.org/us-tax-revenue-2021/
My guess reading this (and my experience growing up in India) is that many countries simply ignore income taxes (if you're the average schmoe with a regular job and salary, you pay taxes. If you are a business person of some sort, you simply accept cash, hide your income and pay no taxes) and the country makes for this shortcoming with a 20% VAT.
https://files.taxfoundation.org/20210217111150/Sources-of-ta... from https://taxfoundation.org/us-tax-revenue-2021/
My guess reading this (and my experience growing up in India) is that many countries simply ignore income taxes (if you're the average schmoe with a regular job and salary, you pay taxes. If you are a business person of some sort, you simply accept cash, hide your income and pay no taxes) and the country makes for this shortcoming with a 20% VAT.
I'm not sure the OECD is the right comparison point because many OECD members (the Latin American and Eastern European countries, mostly) collect far less in tax revenue than the "more developed" OECD nations like the United States, France, Germany, Sweden or Japan. To use your example of India (I know India isn't in the OECD but it has good tax data, has been studied extensively, and its tax regime isn't miles away from the "less developed" OECD nations) - India collects somewhere on the order of 10% of its national income every year in taxes; the other countries mentioned are in the 40-70% range. For a country that only wants to collect 10% of its national income in taxes it's easy to get away with the (relatively simple) mechanism of consumption taxes; to collect more revenues increasingly progressive forms of taxation, such as income taxes, are required.
Well the UK is at 40% too if you also include national insurance contributions, but both income tax and national insurance are calculated by employers and paid automatically out of your payslip (PAYE). This means most people never have to think about doing a tax return, and also means it’s harder to hide earnings for most people.
There is then a process where people with more complex tax affairs then fill in a government questionnaire on a website which instantly calculates the tax rebate/payment required and adjusts your tax balance.
There is then a process where people with more complex tax affairs then fill in a government questionnaire on a website which instantly calculates the tax rebate/payment required and adjusts your tax balance.
In many cases we could encourage/discourage the same behaviors by simply spending money on those things instead of using tax deductions. That's how most countries do it, and as a result their tax systems are much simpler.
We could change the system with a focus on making it easier to file, process, and confirm.
OR… Intuit can keep shoveling money into campaign funds. We know what it’ll be.
OR… Intuit can keep shoveling money into campaign funds. We know what it’ll be.
> I worked on tax software and have seen these kind of efforts. Noble, yes. Short lived, yes.
I've been using excel1040.com for several years now (2017 iirc), and I think it's been around for awhile before that as well -- so I don't think it's fair to call it short lived.
It's pretty amazing how thorough it is. Not perfect, but I found it much more comprehensive and flexible than the free/cheap version of Turbotax.
That said, it is maintained by one crazy guy in Kansas. I doubt the project will survive after he stops working on it.
I've been using excel1040.com for several years now (2017 iirc), and I think it's been around for awhile before that as well -- so I don't think it's fair to call it short lived.
It's pretty amazing how thorough it is. Not perfect, but I found it much more comprehensive and flexible than the free/cheap version of Turbotax.
That said, it is maintained by one crazy guy in Kansas. I doubt the project will survive after he stops working on it.
Open source can solve this problem.
Any service you choose might be missing your edge case. But if you can see all the code and figure out where to plug in your edge case, then you can contribute it for all users in the future to enjoy.
We've already seen people show up and implement features we hadn't researched yet. I encourage you to check it out.
Any service you choose might be missing your edge case. But if you can see all the code and figure out where to plug in your edge case, then you can contribute it for all users in the future to enjoy.
We've already seen people show up and implement features we hadn't researched yet. I encourage you to check it out.
It’s not just fixing problems though. The tax code has changes every year, so the software must be updated accordingly, which is a lot of drudgery. Open source can handle drudgery if there’s a big, passionate community. So you’d need a lot of people who are passionate about the tax code and about OSS. I’d like to see that Venn diagram.
I think this only makes sense to an outsider dev who thinks everything is relatively easy. Tax and accounting is definitely not.
What happens if you fall under two different tax-breaks or if a payment was taken on a certain date which falls before or after a cut-off point? A lot of complexity, that the developers could solve but will not necessarily know how to handle. At least when you submit this to the relevant tax authority, they can spot alarms like this and decide in a reactionary way how to handle it, adjusting tax codes or providing rebates.
There are just way too many things that change too quickly.
That said, I am all for simplification but then you wouldn't need open-source software, you could just do it in a spreadsheet ;-)
What happens if you fall under two different tax-breaks or if a payment was taken on a certain date which falls before or after a cut-off point? A lot of complexity, that the developers could solve but will not necessarily know how to handle. At least when you submit this to the relevant tax authority, they can spot alarms like this and decide in a reactionary way how to handle it, adjusting tax codes or providing rebates.
There are just way too many things that change too quickly.
That said, I am all for simplification but then you wouldn't need open-source software, you could just do it in a spreadsheet ;-)
It's hard for me to understand what you mean.
First of all I'm one of the maintainers on the project. Handling people between two tax-brackets doesn't seem like a problem.
A spreadsheet might be simple for you dealing with your own taxes, but you can't email your spreadsheet to tens of thousands of people and have them all improve upon it and share it amongst each other so all of them can benefit. That's the vision here, I don't know if it will succeed, but that's what we're trying to accomplish.
First of all I'm one of the maintainers on the project. Handling people between two tax-brackets doesn't seem like a problem.
A spreadsheet might be simple for you dealing with your own taxes, but you can't email your spreadsheet to tens of thousands of people and have them all improve upon it and share it amongst each other so all of them can benefit. That's the vision here, I don't know if it will succeed, but that's what we're trying to accomplish.
They were just a couple of examples. If they were the only challenges, it wouldn't be a problem but I bet there are 1000s more (different in each country too.) and that target is constantly moving.
When I said simplification, I meant that if governments would ever accept that tax breaks and special cases are massively expensive to the companies who have to keep track of the changes and then pass on those costs to their customers, then we wouldn't need complex tax software and could use a SS. I can't see that ever happening but I would like governments to be on the hook for the decisions that cost business so much in admin/legals.
When I said simplification, I meant that if governments would ever accept that tax breaks and special cases are massively expensive to the companies who have to keep track of the changes and then pass on those costs to their customers, then we wouldn't need complex tax software and could use a SS. I can't see that ever happening but I would like governments to be on the hook for the decisions that cost business so much in admin/legals.
The consequences of botching it are high, so taking commits from external contributors requires detailed and time consuming reviews.
Further, people don't know what the edge cases actually are at scale. If I go do my taxes and it doesn't account for some weird thing, I simply don't know that this weird thing even exists in the first place to justify a PR to the tax service.
Further, people don't know what the edge cases actually are at scale. If I go do my taxes and it doesn't account for some weird thing, I simply don't know that this weird thing even exists in the first place to justify a PR to the tax service.
Can you elaborate about consequences?
You might not know the edge case exists, but out of all the people that have that edge case hopefully there is one that does know about it and can implement the fix.
Also I'd be curious to know what edge cases you're thinking about. Many people just have a W-2 and a few 1099s. If someone has a complex business or some other concern they're probably at least partially aware.
You might not know the edge case exists, but out of all the people that have that edge case hopefully there is one that does know about it and can implement the fix.
Also I'd be curious to know what edge cases you're thinking about. Many people just have a W-2 and a few 1099s. If someone has a complex business or some other concern they're probably at least partially aware.
>> Generally not the kind of thing for open source
Hard to know in advance, if OS communities can do something well or not. There are examples of taking on pretty sprawling problems successfully. On multi Language, portability and such they can often beat the "armies."
Hard to know in advance, if OS communities can do something well or not. There are examples of taking on pretty sprawling problems successfully. On multi Language, portability and such they can often beat the "armies."
Yes, but the problem with taxation is if you are couple of months behind the change in regulation, you are in violation and depending on the country, you need to pay fines.
It's easy to have open source project where the stakes are "bad translation" or something that doesn't result in fines or problems with IRS/law.
It's easy to have open source project where the stakes are "bad translation" or something that doesn't result in fines or problems with IRS/law.
Same answer, I suppose.
I take the point that this is complex, but that doesn't discard OS/community by default. It's not impossible that community built OS could produce software trustworthy enough to be widely usable. FOSS has played in high stakes arena successfully before.
I would say that the point you and GP make demonstrate that "move fast and break" or "MVP" stuff can't be applied easily. That's not specifically something that impacts OS. It's just a difficulty of the space.
I take the point that this is complex, but that doesn't discard OS/community by default. It's not impossible that community built OS could produce software trustworthy enough to be widely usable. FOSS has played in high stakes arena successfully before.
I would say that the point you and GP make demonstrate that "move fast and break" or "MVP" stuff can't be applied easily. That's not specifically something that impacts OS. It's just a difficulty of the space.
That’s sort of the risk you take when using open source software in general. You can put in a PR to fix that edge case if you feel so inclined. In my experience the IRS can be surprisingly understanding about mistakes on your tax forms (ONCE you get a human on the line…).
The question is, do you think the potential penalty will cost more than the tax software? It comes down to managing risk, and some people may prefer to take the risk, especially if they have relatively simple tax situations.
The question is, do you think the potential penalty will cost more than the tax software? It comes down to managing risk, and some people may prefer to take the risk, especially if they have relatively simple tax situations.
Excel1040 has been around for quite some time, long enough to already have long crossed the "short lived" threshold.
It avoids the state problem by not supporting states at all.
It's done by a single retired person. I always donate a few bucks and I suspect he's making enough off the donations for it to be worthwhile for him.
But yes eventually it might be abandoned if he doesn't find some successor, but so far it's very alive.
It avoids the state problem by not supporting states at all.
It's done by a single retired person. I always donate a few bucks and I suspect he's making enough off the donations for it to be worthwhile for him.
But yes eventually it might be abandoned if he doesn't find some successor, but so far it's very alive.
Plus complex corporate taxation is one of these domains where the venn diagram of domain skills vs programming skills is completely disjoint. Tax specialists will model it in unnecessarily convoluted way in Excel, and the domain will be forever opaque to people who can produce software efficiently.
Then just personal. Yes business might finance development if business taxes were handled, so perhaps personal first or as an additional intention.
> what if I lived in multiple states?
You just pick the state that gives you the smallest tax.
You just pick the state that gives you the smallest tax.
A state tax auditor just started drooling and they're not quite sure why yet.
Partial year residency is an annoying issue. This is not one of the ways we're solving it though!
Came here to say this, except the real fix is to simplify the tax code. It’s like app dev - over the years has built up lots of bloat, some due to legit social interests, some due to back room shenanigans with special interests. Needs an overhaul and mass simplification, but pointy haired ones not willing to take on the project.
TurboTax in made by Intuit which is an evil company that has long worked to make sure that the US tax code is unnecessarily complicated and prevented the government from providing a free alternative.
Agreed with edge cases. Last year I tried using free (as in beer) and even cheap softwares, and they couldn't or wouldn't process for Americans abroad or have the Foreign Earned Income Exclusion exemption which meant they were all no-gos for me. Seems like the tax system should be drastically simpler.
Most countries don't tax expatriated citizens. Even with exemptions you still owe for social security and Medicare. It sounds good since many people will want pension in retirement, but Medicare offers vouchers or exemptions abroad. This was likely the precedence used for “historically, we do not offer any healthcare services to those abroad” when asked if overseas Americans would get access to the COVID-19 vaccine.
Most countries don't tax expatriated citizens. Even with exemptions you still owe for social security and Medicare. It sounds good since many people will want pension in retirement, but Medicare offers vouchers or exemptions abroad. This was likely the precedence used for “historically, we do not offer any healthcare services to those abroad” when asked if overseas Americans would get access to the COVID-19 vaccine.
That is not a typical situation for most Americans. You even knew that as an expat you were going to have to deal with some pretty nasty tax forms for no taxation on the first ~100K for FEIE. Just hire an accountant who knows how to handle that, or pay for the commercial stuff (I assume you did). OSS does not necessarily have to compete on every single feature to help the majority of people. I think as long as it’s clear about its limitations upfront it can be useful.
So what is actually needed, is to transfer law into a computer parse-able syntax, so that software can automatically update itself?
Genuine artificial intelligence.
Some of the tax rules come down to "humans argued in court, and another human decided between their two arguments, because the law on paper was vague or poorly constructed".
Some of the tax rules come down to "humans argued in court, and another human decided between their two arguments, because the law on paper was vague or poorly constructed".
In most countries in Europe (not only in the EU) you can download the official software from the corresponding tax authority. In many places you don't even need to send hardcopies of most documents - at most some printed page with a code and your signature. You must of course keep all the documents on which you based your tax returns in case they ask you specifically for them.
oh, I forgot to say, in some countries you even received them already filled in.
Why not just say "sorry, it looks like your situation is too complicated for us at the moment" to edge cases? Would still help many people.
> I think the only thing that can really disrupt this dynamic are “free” commercial software (like credit karma now cash app), or government provided.
That’s why it was worth $7B for Intuit to acquire Credit Karma. They’re pretty aggressive about buying up potential disruptors.
That’s why it was worth $7B for Intuit to acquire Credit Karma. They’re pretty aggressive about buying up potential disruptors.
The real problem here is that Intuit and other companies lobby millions to maintain their status quo. The right thing to do would be to put every single dollar spent on these corporations into a government program that develops this kind of software or even does the taxes for you (this already exists in many countries in the EU.) Instead, in the US, you pay for Turbotax, they make a profit out if it, and then they use part of the money to lobby and keep the tax code and system rigged for their own benefit. I don't know if open source software is the solution here -- and as far as I know, the tax forms change every year, so it will be forever playing catch-up -- but it seems to be missing the point entirely.
I see this comment on every single article about taxation on reddit and HN, but can you be a bit more specific and identify what this lobbying does and actually point at some examples?
The story of ReadyReturn in California is a pretty clear example.
https://www.npr.org/transcripts/521132960
https://www.npr.org/transcripts/521132960
Aha, here's the actual interesting bit:
The intensity of industry opposition to CalFile has not gone unnoticed in Washington, D.C. In February, IRS commissioner Mark Everson told Congress that he was reluctant to set up an IRS direct e-file system in part because of the bruising battle he witnessed in California...And that leaves federal taxpayers with little prospect of a direct-to-government e-filing system anytime soon...In fact, the industry already ran Big Brother-themed ads in California when tax authorities there were setting up CalFile, a direct e-filing system for state taxes. Lenny Goldberg, the head of the California Tax Reform Association, says Intuit is leading the charge against direct e-filing.
But looking at https://www.ftb.ca.gov/file/ways-to-file/online/calfile/inde... , it looks like I can file my taxes for 2020 via CalFile, so what is this about then? ReadyReturn?
Well, according to
https://priceonomics.com/the-stanford-professor-who-fought-t... There is one program in America, however, that provides some taxpayers with completed tax returns. Since 2007, around 80,000 California taxpayers each year have paid state income taxes this way under a program called ReadyReturn.
ReadyReturn survived corporate lobbying for one reason: Joe Bankman decided to make easy tax filing his personal mission, and he spent $30,000 to hire a lobbyist to counter lobbying by Intuit, the maker of TurboTax software.
but here's something more interesting:
Since 2015, the tax preparation industry has persuaded lawmakers to include a line in the annual appropriations bill that bars the IRS from offering pre-populated returns to taxpayers. The Financial Services and General Government Appropriations Bill approved by the Senate last month extends that ban another year.
The codification of Free File in the Taxpayer First Act and the extended ban on pre-populated returns in the appropriations bill are steps in precisely the wrong direction.
The intensity of industry opposition to CalFile has not gone unnoticed in Washington, D.C. In February, IRS commissioner Mark Everson told Congress that he was reluctant to set up an IRS direct e-file system in part because of the bruising battle he witnessed in California...And that leaves federal taxpayers with little prospect of a direct-to-government e-filing system anytime soon...In fact, the industry already ran Big Brother-themed ads in California when tax authorities there were setting up CalFile, a direct e-filing system for state taxes. Lenny Goldberg, the head of the California Tax Reform Association, says Intuit is leading the charge against direct e-filing.
But looking at https://www.ftb.ca.gov/file/ways-to-file/online/calfile/inde... , it looks like I can file my taxes for 2020 via CalFile, so what is this about then? ReadyReturn?
Well, according to
https://priceonomics.com/the-stanford-professor-who-fought-t... There is one program in America, however, that provides some taxpayers with completed tax returns. Since 2007, around 80,000 California taxpayers each year have paid state income taxes this way under a program called ReadyReturn.
ReadyReturn survived corporate lobbying for one reason: Joe Bankman decided to make easy tax filing his personal mission, and he spent $30,000 to hire a lobbyist to counter lobbying by Intuit, the maker of TurboTax software.
but here's something more interesting:
Since 2015, the tax preparation industry has persuaded lawmakers to include a line in the annual appropriations bill that bars the IRS from offering pre-populated returns to taxpayers. The Financial Services and General Government Appropriations Bill approved by the Senate last month extends that ban another year.
The codification of Free File in the Taxpayer First Act and the extended ban on pre-populated returns in the appropriations bill are steps in precisely the wrong direction.
I would be happy if there was just a place to upload the form to online. No fancy software needed. I have to mail my Quarterly 941 every quarter or pay some overpriced software to do it - https://www.irs.gov/forms-pubs/about-form-941
I think the popular counter argument is worth knowing. The TurboTaxes of the world argue that if the Government just sent you a pre-filled out form they could mess up many of them & you would possibly overpay if you didn't do your due diligence. This tends to get support from those who like to argue in favor of ideas such as "smaller govt" & "govt is inefficient compared to businesses where the capitalism market will pick the winners". Obviously both of these ideas are highly controversial.
I think the popular counter argument is worth knowing. The TurboTaxes of the world argue that if the Government just sent you a pre-filled out form they could mess up many of them & you would possibly overpay if you didn't do your due diligence. This tends to get support from those who like to argue in favor of ideas such as "smaller govt" & "govt is inefficient compared to businesses where the capitalism market will pick the winners". Obviously both of these ideas are highly controversial.
https://www.propublica.org/series/the-turbotax-trap
Propublica is the definitive outlet for reporting on this stuff. They've spent years digging into bills and the millions that Intuit and H&R block spend lobbying around tax reform.
...Which is important because if you start from anywhere else on their site, they'll begin hurling upsell dark patterns at the user, despite proclaiming "free" in copy in many places.
Right now, if I google "file taxes for free usa," the page "TurboTax Free Edition"[1] ranks higher – which is not the same software. And, of course, they do not link to the actual FreeFile page from there.[2]
Edit: turns out that Intuit will no longer be offering that government-sponsored Free File alternative after this year (disclosed in a blog post titled "Accelerating Technology Innovation," hah)[3]. Good riddance. The US Treasury Inspector General found that only 2.4% of taxpayers (2.5 million) actually used the free file software, whereas 5.5x that number could have filed for free, but were likely charged for it instead:
Propublica is the definitive outlet for reporting on this stuff. They've spent years digging into bills and the millions that Intuit and H&R block spend lobbying around tax reform.
> “For a decade proposals have sought to create IRS tax software or a ReturnFree Tax System; All were stopped,” reads a confidential 2007 PowerPoint presentation from an Intuit board of directors meeting. The company’s 2014-15 plan included manufacturing “3rd-party grass roots” support.[0]
...Which is important because if you start from anywhere else on their site, they'll begin hurling upsell dark patterns at the user, despite proclaiming "free" in copy in many places.
Right now, if I google "file taxes for free usa," the page "TurboTax Free Edition"[1] ranks higher – which is not the same software. And, of course, they do not link to the actual FreeFile page from there.[2]
Edit: turns out that Intuit will no longer be offering that government-sponsored Free File alternative after this year (disclosed in a blog post titled "Accelerating Technology Innovation," hah)[3]. Good riddance. The US Treasury Inspector General found that only 2.4% of taxpayers (2.5 million) actually used the free file software, whereas 5.5x that number could have filed for free, but were likely charged for it instead:
> TIGTA estimates that more than 14 million taxpayers met the Free File Program criteria and may have paid a fee to e-file their Federal tax return in the 2019 Filing Season.[4]
>> even does the taxes for you
This should exist. 80% of US citizens can just have this done right now.
>> government program that develops this kind of software
This should not for the remaining 20%.
This should exist. 80% of US citizens can just have this done right now.
>> government program that develops this kind of software
This should not for the remaining 20%.
Right. For most people that are on a payroll and maybe have a 401k and what not, tax preparation should be easily automated. In some EU countries, the government will send you a draft that you basically just have to sign and send back. For the remaining 20% (likely even less than 10%) of people with more exotic investments, it is probably safe to assume that they either have the knowledge to handle the edge cases themselves or the wealth to pay someone to do it for them.
It should also be noted that the IRS already has all of the information about you anyway. Your bank, your brokers, etc all send copies of your financials to them. At that point, filling in a tax return by hand is basically a potential form of punishment for not doing your homework right.
It should also be noted that the IRS already has all of the information about you anyway. Your bank, your brokers, etc all send copies of your financials to them. At that point, filling in a tax return by hand is basically a potential form of punishment for not doing your homework right.
In the UK 80% of the population don't even have to sign anything and send it back. The rest have some employment income information on a website and have to supply the rest of the data, I found it pretty straight forward when I did it for the first time.
The US government is always honest and most assuredly will make their software with the end user in mind. Combined with the excellent customer support offered by the IRS and the US government's proven track record in creating stable software used by millions, this would be the best solution.
I can only assume you're being sarcastic, but this kind of attitude only benefits these corporations. It is a common tactic by the rich oligarchies to defund and delegitimize government institutions so that they are scorned by the population and eventually privatized -- a move that only benefits them in the end. I would suggest Noam Chomsky's "Requiem for the American Dream: The 10 Principles of Concentration of Wealth & Power."
In Spain the tax filling software provided by the government was migrated to a JavaScript browser based interface years ago (it was a Java app before).
The interface is responsive. I literally can send my taxes while I shit. The biggest hurdle is that the day the tax season starts servers can't deal with the load (because apparently everyone wants to be Ned Flanders and file their taxes the first day).
Thanks to the national ID e-card (which does have a chip with a private key and a certificate signed by the government's certificate authority) I don't even need a login/password to enter the tax agency web site, the card proves my identity.
This is not some advanced e-government shit, it's routine and every advanced country is expected to have it (just like universal healthcare, clean water or paved roads). Even development countries are starting to have these kind of web services.
At this point I suspect some people get paid to spread bullshit like this.
The interface is responsive. I literally can send my taxes while I shit. The biggest hurdle is that the day the tax season starts servers can't deal with the load (because apparently everyone wants to be Ned Flanders and file their taxes the first day).
Thanks to the national ID e-card (which does have a chip with a private key and a certificate signed by the government's certificate authority) I don't even need a login/password to enter the tax agency web site, the card proves my identity.
This is not some advanced e-government shit, it's routine and every advanced country is expected to have it (just like universal healthcare, clean water or paved roads). Even development countries are starting to have these kind of web services.
At this point I suspect some people get paid to spread bullshit like this.
Sarcasm aside, the IRS customer support is excellent.
10 years ago I had some special tax situation that the two tax preparers I consulted were not familiar with. They took the safe route in preparing the paperwork. So I called up the IRS support line and a specialist talked with me in detail about my situation and told me the proper way to do it and it saved me $5k in taxes.
Absolutely, but wait times have been increasing due to budget cuts. There’s an unhealthy fear/contempt of the IRS in the US. It’s one of the most important government agencies, and it should be treated as such and given the resources to serve the people better, instead of serving as a perpetual political punching bag.
I can confirm that. I once had a problem with business tax, called them and I was surprised how well they treated me and gave advice.
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I keep being perplexed by how the Americans do stuff. I am Dutch and my government makes it (relatively) easy to do taxes. We got a website we can go to; it's filled by the government and we just need to verify that it is filled correctly and then click submit. Some people can make adjustments where needed and if needed. You can also let an accountant do it for you but that is optional; but useful if you have had a turbulent year that makes takes more difficult (like selling and buying a new house).
When they did not use a website (a few years back) they offered a downloadable application that was available under Windows, MacOS and Linux (GTK). It worked fine.
Yeah, this kind of thing has been suggested a lot, and then TurboTax lobbies to kill it. See https://www.propublica.org/article/inside-turbotax-20-year-f... and more.
Same here in France, there's a website with a multi-stage form, with fields for various things ( revenues, deductions, etc.). Everything they know (revenues from employment, self-employment, investments via French entities, etc.) is pre-filled, you just have to check it, and if something is missing you add it. For 90% of people it's a matter of next-next-check this value with my payslip-next-next.
Using the site is easy, it gets much more complicated the moment you have something to add (due to the enormous complexity of the tax system, even for simple things).
But I agree that almost for everyone it is a 30 seconds exercise to do the taxes.
But I agree that almost for everyone it is a 30 seconds exercise to do the taxes.
At what point will taxes be collected at the EU level?
They're not, EU doesn't collect taxes. It can however influence national tax policies.
I think the Linux app was TCL/TK, so it looked hideous and quite out of place, but surprisingly was available and worked well. Although I think back then the application was only for filing though - pre-filling was added later.
Now with the website it's all much easier still though.
Now with the website it's all much easier still though.
Filing taxes in Germany is just as tedious as in the US. There are a couple of startups now simplifying the process, but at the end of the day, you're still responsible for knowing the tax codes or hiring an accountant.
In the UK, most people don't need to do anything at all. Generally only self-employed or those with "unusual" incomes need to manually declare and pay taxes. It's your duty to check your tax code, but if it's correct (it almost always is) you can just let the system work.
Finland has it even simpler. If I don't want to add anything they just send me calculation and if I do nothing either I get transferred money or they send me a bill.
> I keep being perplexed by how the Americans do stuff.
Our brand of conservatism is informed by Calvinism and hard core Capitalism.
Those in charge believe in using religion to control and the purpose of everything is to make someone money.
Our brand of conservatism is informed by Calvinism and hard core Capitalism.
Those in charge believe in using religion to control and the purpose of everything is to make someone money.
The US government provides this online for free. Only the edgiest of edge cases aren't supported. You can e-file your federal return with this regardless of how much money you make. You still have to do the calculations yourself. But you don't have to use paper.
https://www.irs.gov/e-file-providers/free-file-fillable-form...
https://www.irs.gov/e-file-providers/free-file-fillable-form...
Right. But doing the calculation is pretty hard for most people. Add that to the risk associated to making mistakes and most people will probably prefer paying a bit and have a “””guarantee””” that there are no mistakes. (I don’t disagree he. Just pointing it out.)
Yes, and it's not just calculations. It's things like, "if section F line 27 is greater than the total in section B line 12, subtract the amount in section z line 127 from this total and multiply the result by the appropriate tax rate (see long form instructions for form 478B and fill out Worksheet 12C to calculate your appropriate tax rate).
This is not a verbatim quote, but solar to what you have to do now to calculate health care insurance subsidies.
This is not a verbatim quote, but solar to what you have to do now to calculate health care insurance subsidies.
I build a spread sheet for all the forms and worksheets that require calculations. FreeFillableForms does some of the calculations for you, and does not have any worksheets. Excel has formulas for everything I have encountered paying taxes, and I have a joint account with stock options and several rental property LLCs.
As a bonus, the spreadsheets are generally reusable, after checking to make sure there are no changes.
As a bonus, the spreadsheets are generally reusable, after checking to make sure there are no changes.
FreeFillableForms is great and has saved me a ton of time, but it does not do the calculations automatically for every field. You still have to manually lookup certain things from tables. It's freakin' frustrating, because there's no reason why it couldn't automate those as well.
Even more frustrating because it doesn't tell you that you haven't done the calculation or worse, you haven't transferred a field from one form to another.
I failed to copy my self-employment tax back to my 1040 for 2020, despite having calculated it correctly. No warnings, the form filing went smoothly, and 4 months later I got a notice from the IRS.
It's insanity.
I failed to copy my self-employment tax back to my 1040 for 2020, despite having calculated it correctly. No warnings, the form filing went smoothly, and 4 months later I got a notice from the IRS.
It's insanity.
I hear you. I keep hoping they will add more calculations in future versions, and they do, little by little.
My suspicion is that it is deliberately deprecated due to pressure from for-profit tax prep companies.
My suspicion is that it is deliberately deprecated due to pressure from for-profit tax prep companies.
Except it's very useful to be able to import the many many forms for the various sources of income automatically. If you're just a w2 and a 1099-int then yes, obviously it's not hard to file taxes manually.
Those features are really only viable at the scale of large commercial tax software, not the efforts described in the submitted post.
PDFs aren't exactly used in a standardized way, so trying to make this work for even a fraction of the numerous tax form issuers requires a lot of work, and a lot of ongoing maintenance. You'll need to prioritize the actual tax forms, and annual updates to those first.
PDFs aren't exactly used in a standardized way, so trying to make this work for even a fraction of the numerous tax form issuers requires a lot of work, and a lot of ongoing maintenance. You'll need to prioritize the actual tax forms, and annual updates to those first.
I used TurboTax online last year and was pretty happy with it's ability to import 1099 data from several companies I use like vanguard and Ameritrade. So the PDFs aren't standardized but many providers have apis to pull the data. In fact, they may be using something like Plaid that consolidates all the APIs into one.
Well, TurboTax happens to be the most widely used large commercial tax software, and the brokers you mentioned are also quite large and popular. Whatever integration has been done is almost certainly proprietary and not freely reusable.
Hypothetically, even if an API existed, building the integration in your own app also costs FTE hours that are likely drawn away to higher priority tasks.
Hypothetically, even if an API existed, building the integration in your own app also costs FTE hours that are likely drawn away to higher priority tasks.
Sure, but this just means open source tax software isn’t viable. TurboTax integrates with most financial services Americans use, to compete with them this functionality has to be matched somehow.
I use Free File Fillable Forms together with excel1040.com. First I fill in the numbers in Excel, then into Free File Fillable Forms, and check that they get the same answers. It works well for me.
It's 2021 and you see no problem with this?
Filing personal taxes in the US sounds like filing taxes for a company in other countries. A complete nightmare consisting of tons of forms that some bureaucrat dreamed up, which nobody really knows how to fill out correctly. Software exists to fill them out for you, and if you use some well-known software to do it, it's just assumed to be correct by everyone; including the state.
This perception is what keeps a lot of tax preparation companies in business. I know people who could fill out their taxes in 10 minutes, who would instead pay hundreds of dollars every year to have it done by one of those “tax stores.” If US high schools would spend one day to walk kids through filling out a tax return, they’d probably put H&R Block out of business. Which is also why it’s won’t ever happen.
Both you and the parent are right. I actually did get basic filing instructions in high school and managed to handle my own taxes easily for the first fourteen of my working years.
Eventually my taxes fell into the realm of forms that even CPAs can make mistakes on or are unfamiliar with. I am really conservative with this stuff and really make sure to pay what I owe. I, or my CPA, still make mistakes that result in the State or Federal government sending me small “you paid us too much” checks every so often. That’s been true when I’ve done it myself, used TurboTax, or used CPAs. I have a friend with similarly complicated taxes and she just got her first “you owe us $XX” letter for this TY2020 and another $XX check in her favor for TY2018 and TY2019 making the whole thing a wash.
If they can tell you that you paid the wrong amount a couple months after filing it feels like for those on a W2 and without unreported 1099 income they could just send a statement with an invoice if you owe and a check if you’re owed. The status quo for those individuals really is as you say. There’s enough complexity baked in that people throw their hands up in the air and just pay the $100 for basic tax prep that should be unnecessary in the first place and is not much more difficult than balancing a checking book.
Eventually my taxes fell into the realm of forms that even CPAs can make mistakes on or are unfamiliar with. I am really conservative with this stuff and really make sure to pay what I owe. I, or my CPA, still make mistakes that result in the State or Federal government sending me small “you paid us too much” checks every so often. That’s been true when I’ve done it myself, used TurboTax, or used CPAs. I have a friend with similarly complicated taxes and she just got her first “you owe us $XX” letter for this TY2020 and another $XX check in her favor for TY2018 and TY2019 making the whole thing a wash.
If they can tell you that you paid the wrong amount a couple months after filing it feels like for those on a W2 and without unreported 1099 income they could just send a statement with an invoice if you owe and a check if you’re owed. The status quo for those individuals really is as you say. There’s enough complexity baked in that people throw their hands up in the air and just pay the $100 for basic tax prep that should be unnecessary in the first place and is not much more difficult than balancing a checking book.
Yes, I have also gotten those. Pretty nice to get a check that you weren’t expecting, from the IRS no less. In my experience a lot of CPAs are very dependent on tax prep software anyway. It might be more advanced “professional”tax software, but still has limitations. A good CPA will be more aware of those limitations ahead of time, but mistakes are almost inevitable over the course of a few years.
> If US high schools would spend one day to walk kids through filling out a tax return, they’d probably put H&R Block out of business.
Lmao no. Look at the number of people who eat out every day instead of cooking.
People go to H&R Block because filing taxes is tedious, boring and can land you in jail (or at least, serious legal hot water) if done wrong.
Lmao no. Look at the number of people who eat out every day instead of cooking.
People go to H&R Block because filing taxes is tedious, boring and can land you in jail (or at least, serious legal hot water) if done wrong.
90% of people in the US could fill out their taxes by hand in less than 5 minutes. It's <12 lines on a one page form (1040-EZ) and half of those won't even apply to everyone.
Yes, the IRS could do even this for you, but there's a myth that US taxes are always monstrously complicated that everyone likes to perpetuate:
1) The tax companies like it because it keeps people scared of doing it themselves
2) Tax reform advocates like it because it's they can cluck and shake their head at the corrupt government and tax companies
3) It _can_ get complicated if you have a complicated tax situation
Yes, the IRS could do even this for you, but there's a myth that US taxes are always monstrously complicated that everyone likes to perpetuate:
1) The tax companies like it because it keeps people scared of doing it themselves
2) Tax reform advocates like it because it's they can cluck and shake their head at the corrupt government and tax companies
3) It _can_ get complicated if you have a complicated tax situation
>90% of people in the US could fill out their taxes by hand in less than 5 minutes. It's <12 lines on a one page form (1040-EZ)
Even when 1040-EZ was a thing (which it isn't any more), it was only relevant for filers with no dependents (e.g. no children), and given that something like 40% of households have children under 18 I am pretty sure that 90% is a bogus.
Even when 1040-EZ was a thing (which it isn't any more), it was only relevant for filers with no dependents (e.g. no children), and given that something like 40% of households have children under 18 I am pretty sure that 90% is a bogus.
The 1040EZ is deprecated. https://www.irs.gov/forms-pubs/about-form-1040-ez
This poster agrees with you. It only took them a single weekend to get them done this year: https://news.ycombinator.com/item?id=28756358
US tax laws are monstrously complicated. There’s a couple thousand pages of tax code, along with close to 10,000 pages of IRS regulations, that you won’t understand adequately unless you’ve also studied the many tens of thousands of pages of related case law. There is no single person alive who fully understands US tax laws, and even a well resourced team of people likely won’t when combined.
It’s possible to understand it well enough to get by, but you’re pretty much guaranteed to make mistakes in one way or another, and some of those mistakes are pretty much guaranteed to be criminal offences. You could live your whole life without that ever becoming an issue, but the gamble you’re taking isn’t that you’re never going to make a mistake (you will), it’s that the IRS will never commit any considerable resources to investigating your mistakes.
It’s possible to understand it well enough to get by, but you’re pretty much guaranteed to make mistakes in one way or another, and some of those mistakes are pretty much guaranteed to be criminal offences. You could live your whole life without that ever becoming an issue, but the gamble you’re taking isn’t that you’re never going to make a mistake (you will), it’s that the IRS will never commit any considerable resources to investigating your mistakes.
There is a ton of tax code, but if you have W2 income in one state and only contributed to a 401k then virtually none of those pages of laws apply to you. Most people fall into this category.
Genuine errors on your taxes are also not criminal offenses.
Genuine errors on your taxes are also not criminal offenses.
> some of those mistakes are pretty much guaranteed to be criminal offences.
Unless there is malicious intent, the IRS does not give a fuck. They will bring it up, and ask you to fix it.
Unless there is malicious intent, the IRS does not give a fuck. They will bring it up, and ask you to fix it.
One of the most brutal parts of the US tax system is the informational returns you have to do if you have any international connections at all. If you’re unfortunate enough to live abroad and be self employed or own a small business, you basically get fucked. Lookup IRS form 5471.
The US assumes that all people who have anything to do with other countries are billionaire owners of multinationals with armies of lawyers to fill out paperwork.
The US assumes that all people who have anything to do with other countries are billionaire owners of multinationals with armies of lawyers to fill out paperwork.
I use https://www.freefilefillableforms.com/ to submit my 1040 every year. It’s recommended by the IRS if you know what you are doing.
This work excites me a lot, but I can’t help but wonder if this should be a government-funded rather than volunteer-driven effort.
Government funded efforts can be disrupted by the tax software lobby.
The IRS has to program all the rules into their system anyway. If they could simply standardize those rules into a git controlled Yaml file or something better suited, keeping software updated could be made rather easy for open source projects.
The French tax office for example has created a programming language in which the legally binding tax code is defined.
Should be, yes. Will be, no. Tax preparation is a multi-billion dollar industry.
It can start as an open source project and can end up goverment-funded.
If you're interested in using open-source tax software for analyzing policy changes, here are a few really cool projects written in Python:
- https://taxcalc.pslmodels.org/
- https://taxcalc.pslmodels.org/
- webapp here: compute.studio/PSLmodels/Tax-Brain/new/
- webapp here: https://uk.policyengine.org/
Until policy makers puplish the tax rules in an executable algorithmic form, I am afraid open projects like this will have difficulty to keep up with the regulation changes.
Google link if helpful.
https://sites.google.com/view/incometaxspreadsheet/home
https://sites.google.com/view/incometaxspreadsheet/home
The IRS option Free File Fillable Forms has online forms that compute internal arithmetic and self-efile. This eliminates many hand math errors.
However this system isnt good at telling you which forms you need to file. You could miss an important one. For example sometimes you need a Schedule D and sometimes you dont. If you income reaches six figures you have to calculate the AMT and NIT forms to see whether they apply or not.
However this system isnt good at telling you which forms you need to file. You could miss an important one. For example sometimes you need a Schedule D and sometimes you dont. If you income reaches six figures you have to calculate the AMT and NIT forms to see whether they apply or not.
> Your options are to do it by hand, pay someone like Intuit, or if you are below a certain income threshold get some tax software for free
You can also hire an accountant. Our accountant does our taxes for just a tad more than what TurboTax's self employed tier costs. Even if we could get away with TurboTax's deluxe tier, I'd still argue the slight added cost of the accountant is well worth it.
You can also hire an accountant. Our accountant does our taxes for just a tad more than what TurboTax's self employed tier costs. Even if we could get away with TurboTax's deluxe tier, I'd still argue the slight added cost of the accountant is well worth it.
The site seems down but I really want to see how someone was able to fit the entirety of the US tax code into an Excel workbook.
The excel1040 site is/was just a redirect to https://sites.google.com/view/incometaxspreadsheet/home
What do people think of GNU Cash? I tried it once when I started up my own company and wanted to keep books. Noticed it was very much adapted for non-US audiences. Even after adding Swedish account codes it was still missing a lot of info. It was essentially a glorified spreadsheed. Could have stuck with Libreoffice calc as far as features went.
Tried it for a small non-profit and shared your finding that a well-made spreadsheet is just as good if not better. But a larger company would've quickly hit a regulatory wall as well, not just a technical one. For accounting software to be legal under our tax laws it needs to prevent you from doing things that are illegal (back-dating, editing, deleting...) and it needs to have a technical study done to prove that. Such a study is of course expensive and must be commissioned by the vendor. You can imagine how that just isn't possible for GNU Cash and similar community-built programs.
The IRS wanted to automate your tax filing by filling out the basic tax forms from your W2s, 1099s and family size. (Other countries do this) However a strong tax accounting lobby canned it. They substituted with free federal filing for those below median income.
The effort should be focused on forcing states to standardize their tax code and states/IRS to provide a simple filing service. If the answer to what’s blocking it is “some corporations wouldn’t like it” then it can’t be that big a problem
Here's the GitHub repo of one of the projects mentioned in the article: https://github.com/ustaxes/UsTaxes
All of the IRS forms are in pdf format. The form fields are programmable in Adobe Acrobat. One could code in all the necessary computations into the form fields and combine all the forms into a booklet.
You don't need software to file taxes. You can download the forms (1040, etc.) from the IRS website (and your state IRS's website), fill them in, print them out, and mail them to the IRS. It costs a few (literally a few) dollars for the postage and a certificate of mailing from the USPS as proof that you had the forms sent out by the deadline.
The forms are not super straightforward but not incredibly complex either. For most normal people with a W-2 or 1099/self-employed income, retirement savings accounts, and some brokerage/investment accounts, you should be able to get it done in a weekend of research & work using resources on the internet, referencing the IRS's instructions for their forms, and using your previous year's return as a reference. And less time in future years once you've figured out how it works. You will need Adobe PDF software, but it's libre and a Windows virtual machine with the network connection disabled will solve that if you use Linux on your computer.
It's not for everyone, but if you don't want to support the evil tax industry in the US (there have been a number of posts on HN about this) then it's a good option.
Additionally, you can create an account on Turbotax and fill in all your information (but with fake name, SSN, employer tax numbers, etc.) and it'll tell you the amount of remaining tax obligation / tax return that it calculates. So you can use that to verify that you did everything properly. Turbotax only charges money to actually submit the return through them; even if you would normally require a paid TurboTax plan (e.g. for contractors, living in multiple states, etc.) you can still go through the process and get the final number without paying.
I did this for the first time this spring and was able to get it done in a weekend. I had W-2 and 1099 income/deductions and lived in multiple states last year. From what I can recall, basically the form 1040 is the 'root of the tree'; your W-2 income goes into that and every other taxable/deductible thing you do ends up aggregated into the 1040. The schedules (A,B,C,...) of the 1040 are like the first level child nodes; each one has a different topic(s) like self employment gains/losses, farming/fishing income, etc. so you can skim over them and see what applies to you, then fill out the ones you need to and enter their totals back into the 1040. The schedules will have lines into which you aggregate specific incomes/deductions, and the instructions for the schedules will have details on how to calculate all of that. And for other special deductions there are lines in the 1040/schedules that mention them. I'm not a CPA so don't blame me if you follow those instructions and something goes wrong.
The forms are not super straightforward but not incredibly complex either. For most normal people with a W-2 or 1099/self-employed income, retirement savings accounts, and some brokerage/investment accounts, you should be able to get it done in a weekend of research & work using resources on the internet, referencing the IRS's instructions for their forms, and using your previous year's return as a reference. And less time in future years once you've figured out how it works. You will need Adobe PDF software, but it's libre and a Windows virtual machine with the network connection disabled will solve that if you use Linux on your computer.
It's not for everyone, but if you don't want to support the evil tax industry in the US (there have been a number of posts on HN about this) then it's a good option.
Additionally, you can create an account on Turbotax and fill in all your information (but with fake name, SSN, employer tax numbers, etc.) and it'll tell you the amount of remaining tax obligation / tax return that it calculates. So you can use that to verify that you did everything properly. Turbotax only charges money to actually submit the return through them; even if you would normally require a paid TurboTax plan (e.g. for contractors, living in multiple states, etc.) you can still go through the process and get the final number without paying.
I did this for the first time this spring and was able to get it done in a weekend. I had W-2 and 1099 income/deductions and lived in multiple states last year. From what I can recall, basically the form 1040 is the 'root of the tree'; your W-2 income goes into that and every other taxable/deductible thing you do ends up aggregated into the 1040. The schedules (A,B,C,...) of the 1040 are like the first level child nodes; each one has a different topic(s) like self employment gains/losses, farming/fishing income, etc. so you can skim over them and see what applies to you, then fill out the ones you need to and enter their totals back into the 1040. The schedules will have lines into which you aggregate specific incomes/deductions, and the instructions for the schedules will have details on how to calculate all of that. And for other special deductions there are lines in the 1040/schedules that mention them. I'm not a CPA so don't blame me if you follow those instructions and something goes wrong.
The website addresses that in the first paragraph. You can, as they did, do it manually yourself. However, you're very likely to make unnoticeable mistakes due to it being a government tax form. Using a weekend to do something a computer can do for you in seconds is both a waste of time and likely to make you spend another weekend amending it after they send it back.
The vast majority of people just want it to work like it works everywhere else. Computers handle it, and you overwrite anything that the computers can't know so that it's correct. That's what tax software is for, and that's what these projects try to accomplish in a FOSS way.
The vast majority of people just want it to work like it works everywhere else. Computers handle it, and you overwrite anything that the computers can't know so that it's correct. That's what tax software is for, and that's what these projects try to accomplish in a FOSS way.
Oops! I went to the article but skipped straight to the second half... the highlighted Excel formula caught my attention.
Last I checked, the federal forms are fillable PDFs that work with libre software (eg evince). The forms themselves are quite straightforward, the problem is everything leading up to the forms.
To me, the value proposition of tax software is that it walks you through all the topics interview style, so you can kind of relax and go with its flow. Otherwise you've got to create that structure yourself - determining what's relevant, sorting income into categories, figuring out what boxes it's supposed to go in, what schedules you need, etc.
I wonder if libre software that only did the interview portion would be more sustainable. It could create category tallies and supporting statements that don't really change every year, and direct you to fill those numbers in on the forms in the appropriate box. Then it wouldn't have the maintenance burden of creating print-ready forms that haven't even been released until taxes are due.
To me, the value proposition of tax software is that it walks you through all the topics interview style, so you can kind of relax and go with its flow. Otherwise you've got to create that structure yourself - determining what's relevant, sorting income into categories, figuring out what boxes it's supposed to go in, what schedules you need, etc.
I wonder if libre software that only did the interview portion would be more sustainable. It could create category tallies and supporting statements that don't really change every year, and direct you to fill those numbers in on the forms in the appropriate box. Then it wouldn't have the maintenance burden of creating print-ready forms that haven't even been released until taxes are due.
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Meanwhile, at site of russian federal tax service:
- https://imgur.com/a/NUZZlJM (file for tax returns)
- https://imgur.com/a/gUGf9wU (all income, automatically known by tax authority by electronic data exchange with my employer and broker)
- https://imgur.com/a/Nvh5RI8 (all my estates taxes, automatically calculated and sent as invoice to my bank)
- https://imgur.com/a/NUZZlJM (file for tax returns)
- https://imgur.com/a/gUGf9wU (all income, automatically known by tax authority by electronic data exchange with my employer and broker)
- https://imgur.com/a/Nvh5RI8 (all my estates taxes, automatically calculated and sent as invoice to my bank)
Every country has its own tax laws, impossible to implement and to use. Plus politicians keep changing the tax laws all the time.
Sounds like a minefield. How do you know which formulas have been updated for the latest law changes? Hire a tax guy?
>Filing taxes in America sucks
Come to Brazil and the Receita Federal will suck you dry
Come to Brazil and the Receita Federal will suck you dry
Just move to another country that hasn't made deals with tax companies. Believe it or not, the government is perfectly capable of doing your taxes for you. There is no reason to waste your time on this every year other than corporate greed.
Title should be American Open Source Tax Software.
Is there something like this for Germany?
elster.de is the official means to input your tax info supported by the tax office. However, it's largely an online form with some legalese and dry formal explanations in a sidebar.
You can largely use it if you know what you are doing or have the most simplest tax case, but it won't offer you suggestions how to optimize taxes, and doesn't include large lists of items that you could possibly deduct. This service is offered by proprietary tax tools like WISO or QuickSteuer which offer questionnaires trying to cover more details of your tax situation to find out opportunities to optimize, and include large help files that contain examples and explanations.
Cost for these proprietary tools can be very low, they go on sale for like €5-€10 at discounters during tax season or are like €20 for the fully featured versions.
These tools also manage items like long-term deductions over the years, so that's their lock in effect.
You can largely use it if you know what you are doing or have the most simplest tax case, but it won't offer you suggestions how to optimize taxes, and doesn't include large lists of items that you could possibly deduct. This service is offered by proprietary tax tools like WISO or QuickSteuer which offer questionnaires trying to cover more details of your tax situation to find out opportunities to optimize, and include large help files that contain examples and explanations.
Cost for these proprietary tools can be very low, they go on sale for like €5-€10 at discounters during tax season or are like €20 for the fully featured versions.
These tools also manage items like long-term deductions over the years, so that's their lock in effect.
There's Elster.de
No way would I ever trust open source tax software not to mess things up somehow. The paid software has a big incentive to get it right.
Do you not trust any opensource software and prefer only paid software to build your systems?
Guess who is going to get pulled into court when someone's taxes get screwed up and the IRS comes after them?
> the IRS doesn't consider accidental mistakes as fraud. A case for intention has to be made before the IRS actually charges you with a crime.
It's relatively easy to screw up your taxes by misentering a number into the paid software as well. The various guarantees the paid software people offer don't cover this sort of situation. I don't think this is really a factor.
It's relatively easy to screw up your taxes by misentering a number into the paid software as well. The various guarantees the paid software people offer don't cover this sort of situation. I don't think this is really a factor.
Do you think if that happened while using Intuit software, they are going to pull intuit into court? When you prepare your taxes using software, it all looks the same once the IRS receives it. It will show up as self prepared. If you pay a CPA to do it, then they also sign the return. But in either case, you will be responsible for underpaying your taxes and will have to make up the difference. I doubt any of the software companies offer any kind of guarantee.
The big tax companies do offer some guarantees of the accuracy of their calculations.
Which is probably not the kind of mistake you’ll have on your taxes anyway. Basic arithmetic is easy. And if you do make these mistakes it’s not likely the IRS does anything more than correcting it. But it’s more than no guarantee.
Also they do provide human support.
Which is probably not the kind of mistake you’ll have on your taxes anyway. Basic arithmetic is easy. And if you do make these mistakes it’s not likely the IRS does anything more than correcting it. But it’s more than no guarantee.
Also they do provide human support.
As far as I know, all the tax software tells you you are responsible in the end.
Obviously not, that’s why I specified tax software.
Open source can be paid.
No it can’t.
Keka[1] and Textual[2] are both open-source and you can pay for them on the Mac App Store or direct purchase. The former gives you compiled builds either way; the latter only if you pay.
[1]: https://github.com/aonez/Keka
[2]: https://github.com/Codeux-Software/Textual
[1]: https://github.com/aonez/Keka
[2]: https://github.com/Codeux-Software/Textual
I bought my first Linux distro in a box on a shelf in a store.
Be serious.
I am serious. And Red Hat had $3.4 billion in revenue the year it was acquired. There are plenty of people getting paid to write open source software. The top contributors to open source projects are frequently for-profit companies. Open source != hobbyist.
There’s nothing about paid software development that requires source code to be kept private.
There’s nothing about paid software development that requires source code to be kept private.
Their customers aren’t paying for the software.
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They do make a lot of money from value add services, but in some cases, yes they absolutely are paying for software. This is fairly common when people want features/updates that don’t yet exist.
That’s paying for the development of the software.
Obligatory reminder that libre software need not be $0.
excel1040.com appears to be down.
Tax attorney here, these are great resources and should be encouraged. A lot of folks (looking at you, Intuit) spend a lot of money to make a lot more keeping a lock on the market.
These kinds of initiatives don't get everyone all the way there (see: other comments about edge cases) but they can go a long way towards educating folks about what filing looks like -- and at least some of them will give it a go themselves.
tldr: good post
These kinds of initiatives don't get everyone all the way there (see: other comments about edge cases) but they can go a long way towards educating folks about what filing looks like -- and at least some of them will give it a go themselves.
tldr: good post
Unhappy with turbotax I have been using freetaxusa for many years which is also free.
It’s relatively easy to make a free 1040 file. The real problem comes from all. The. Edge. Cases.
1) do you support xyz state? 2) what if I lived in multiple states? 3) what if i…
And on and on.
And it’s not just one and done. Every year IRS and states are changing their shit so you have to go thru and make all kind of updates and verifications every year.
It takes an army to build and maintain. Generally not the kind of thing for open source (unless they’re paid). But then what’s the point? One may say it’s more transparent, but TurboTax etc are transparent with their formulas - you can check every box they fill in for you.
I think the only thing that can really disrupt this dynamic are “free” commercial software (like credit karma now cash app), or government provided.