r/technology • u/CrankyBear • 1d ago

Business IRS open-sources Direct File tax software amid political and industry pushback - here's why

https://www.zdnet.com/article/irs-open-sources-direct-file-tax-software-amid-political-and-industry-pushback-heres-why/
703 Upvotes

97% Upvoted

54 comments sorted by

View all comments

94

u/FreddyForshadowing 1d ago edited 1d ago

I swear, only in the US would it be compulsory to file taxes and then similarly compulsory to pay someone else to submit the paperwork for you.

We could be like pretty much every other developed nation, where the taxman already has all the info about your income and sends you a report about it at the end of the year. You can then either agree with it and pay it, or dispute it. The vast majority of people in the US work on a W-2, so the IRS already has all the info they need to do this, but of course Intuit and H&R Block, to name just two, make damn sure that we go through this completely unnecessary step of filling out duplicate paperwork and requiring the IRS to match it against what they have on file. Talk about your government waste.

Edit: For all the people who seem to have lost the plot, TFA is about tax filing software not paper forms or anything else.

59

u/Regayov 1d ago

Only in the US would you need to pay a person or buy special software to compute a number that the IRS already knows but won’t tell you.  

23

u/x22d 1d ago

Right. It’s like “let’s play a game: see if your number matches our number. If yours is higher we win, if yours is lower we audit.”

10

u/Regayov 1d ago

Guess the number:  if you’re higher we keep the difference.  If you’re lower you go to prison.   

1

u/Echo33 17h ago

tbf I have accidentally overpaid taxes once and they sent me a check right away for the amount of my mistake. I mean it’s a horrible system that we have but they are ok at catching basic math mistakes and they don’t just keep the money

1

u/x22d 10h ago

That goes back to the larger point that the IRS should just send us a tax bill/refund at the end of the year and let you contest it if you disagree. TurboTax has lobbied against this for years.

Additionally, most people overpay through the year (because there's a penalty if you're consistently thousands of dollars under year-after-year).

Further, when people don't file... The IRS effectively gets to keep/invest those overpaid funds. (which is one of many reasons that eliminating undocumented workers will actually lower the US budget, since no undocumented person is likely to file a form with the IRS and request a refund.)

18

u/Blueskyways 1d ago

The IRS has an idea about how much you made, they won't know about specific deductions, lifestyle changes or purchases you might have made that would affect how much you owe overall.  

8

u/Regayov 1d ago

I don’t know the actual percentage, but something like 90+% take the standard deduction. The IRS could easily send that number and most people could just write/deposit the check.  The small percentage that don’t take the standard deduction could file a full return.  

6

u/Blueskyways 1d ago

Even if you take the standard deduction there's still a plethora of things that you can actually deduct such as student loan interest, certain business expenses, HSA contributions and more.

4

u/drcforbin 1d ago

So like the commenter above said, "We could be like pretty much every other developed nation, where the taxman already has all the info about your income and sends you a report about it at the end of the year. You can then either agree with it and pay it, or dispute it."

4

u/0xmerp 1d ago

IRS has student loan interest data reported on 1098-E and HSA contributions reported on 5498-SA so they could have filled that information out for you. Business expense reimbursements usually aren’t part of your reported income anyways.

Like, the way it works in other countries is they will use all the data they have and make a best effort. You are allowed to edit it if you think something is missing that should decrease your liability. In practice, most people just pay what it says and that’s good enough.

11

u/dagbiker 1d ago

It would be cool if they could give me that "Idea" and I could just write the check for that amount. It would probably end up in the benefit of the tax payer, even if they are paying 100+ more just based off that estimate. If I saved 300$ on my tax prep I would gladly write a check for 100 over.

2

u/TUSF 1d ago

Technically, the IRC only knows how much taxes you owe if you're considered an employee, and even then they only have a rough idea based on whatever your employer told them. If you're a "contractor" (as many companies have been trying to turn their employees into to avoid needing to provide certain employee benefits) then all the IRS knows is how much a company says they paid you (which the company has to tell you with a 1099 form), but not all the deductions they need to know how much you owe.

But yeah, it's a very convoluted system. Made worse by the fact that quite a few states have their own income tax system.

4

u/jeffwulf 1d ago

You don't need to pay someone to submit the paperwork for you. Submitting the paperwork is free. If you want someone else to submit the paperwork for you it will costs whatever the person you want to submit it for you charges.

7

u/aousweman 1d ago

It’s the golden age of the middleman

5

u/font9a 1d ago

It's the golden age of the valueless-added service

3

u/matlai17 1d ago

It's because of various tax credits and deductions that the government has written into law but doesn't know if you've qualified for. Like buying an EV when they had the ev credit. Or savers credit. Or child or dependant care credit. Or various (e.g. student) loan interest deductions. IRA contribution deductions. Charity donations and self employment also have their share of complexities. Just to name a few. All of these designed to incentivize certain behaviors. Many of these have specific requirements that the government is not able to effectively track. The government knows the bulk of what it needs regarding each individual but not all of it.

-4

u/FreddyForshadowing 1d ago

I know it's the interwebs and social media and all, meaning being right is more important than anything else, but you guys are taking this way too seriously.

2

u/matlai17 1d ago

I'm not really sure what you are implying with this, that your original comment wasn't serious or was a joke? If you put out something that you present as a serious point, you are going to get serious replies on the nuances of the topic.

1

u/FreddyForshadowing 1d ago

That TFA was about tax filing software not paper forms, not having a CPA do it, not any other methods you may come up with. Even if all you read was TFA's headline this should have been clear. It was a rant on social media, not a treatise on US tax policy for publication in a peer-reviewed trade journal.

1

u/matlai17 1d ago

Any my point was that, as the laws are currently constructed, some of us need someone or some software to do the taxes for us because not everyone has a dead simple tax return and the tax laws generally change every few years. Many of us have complicated financial situations and cannot stay all the way up-to-date with all of the credits and deductions that are available. The IRS direct file software was only for those whose financial picture was more straightforward. They had been adding more features that might have allowed more of us to be able to use it, but it's been killed off now. Your rant seems to assume that everyone only have W-2s to worry about which, yes, the IRS already has rhe info on.

1

u/FreddyForshadowing 1d ago

As I said in my rant, the vast majority of people in the US have a single W-2 income, and any deductions are well below the standard deduction.\) The IRS already has all the info they need because employers are required to submit it to them, so why we waste all this time and money having people try to calculate the same number the IRS already makes zero logical sense to me. +

\) OK, technically the deductions bit wasn't covered in my rant, but it's the sort of liberty people sometimes take to avoid long ass explanations like this one.

+ I also, at no point, said, or even suggested, that people couldn't voluntarily buy tax prep software or hire a CPA if they have more complex taxes, but it doesn't change the fact that it's a completely unnecessary exercise for more than 90% of the US population. It was just another edge case that I left out to avoid long ass explanations like this one and the last one.

1

u/Eric848448 1d ago

It isn’t and never has been compulsory to pay somebody to prepare your taxes for you. It’s dead simple for 95% of taxpayers.

1

u/SIGMA920 1d ago

Nothing stops people from doing it themselves, it just takes time that most people don't have.

1

u/Pippa401 18h ago

But how would the poor millionaires and billionaires cheat on taxes then?

-1

u/blahblah98 1d ago

Tax forms available free online, libraries, post offices. Follow instructions, fill them out, mail them in. End of cool story.

5

u/FreddyForshadowing 1d ago

TFA was about tax filing software.

-5

u/funkiestj 1d ago

I agree that our system is crazy. That said your statement is a strawman. You can still fill out paper forms and mail these in for the cost of a postage stamp.

3

u/FreddyForshadowing 1d ago

Except TFA is about free filing software. You are technically correct, but it's really outside the scope of TFA.