I quit journalism mid-aughts and, seeking a stable career, started a grad program in accounting. Hiring dried up due to the 2007 great recession, and I ended up taking a job as a state tax auditor.
It was easily the most interesting job I've ever had. Getting to see how businesses work and how many weird ways there are to make money was fascinating. Spend a week at an online store that sells survivalist supplies getting to see every cent in and out. The occupy the next few days with a tiny company that makes millions renting portable toilets to events.
The pay was terrible; benefits - pension, four-day work week - were amazing. It was also very hard. So much business falls into ambiguous grey areas of taxability. You could ask three different supervisors questions regarding whether a particular activity was taxable and might end up with four different, conflicting answers.
I left after a couple years for better pay. Was soon making 3x as much in a respected firm - that was only about 20% as hard as being a good state tax auditor.
I've been looking at the IRS job listings lately out of nostalgia. Pay is actually solid.
Do I understand correctly that you made 3x as much working for a firm that (I assume, among other things) minimizes tax burdens than you made working for the state to make sure businesses didn't cheat on their taxes?
No. I ended up working in an unrelated consulting role.
However, the vast majority of exits from the state tax auditor agency were to firms that specialized in tax audit defense, where people make 1.25-2x the money as auditors to minimize burdens. Like prosecutors becoming defense attorneys.
That makes sense. I've recently been introduced to the weird world of estate taxes and observed two things: 1) the family in question has probably paid the CPAs, lawyers, etc. more, in aggregate, than they actually saved in taxes and 2) they would be perfectly happy if that were the case.
I was curious if the gap between state auditor and private tax-minimizer is really a factor of three, at which point it seems like the only reason to work for the state in the first place would be to get enough experience on the auditing side to get hired by the minimizing side. Like, even if the work is interesting, triple the pay for an easier job would be really hard to pass up.
The Trump years revealed to me that something I had always downplayed was actually true -- that there is a vast, almost-invisible ocean of white-collar crime happening every day in this country and that the vast majority of those people will never face any consequences.
I'd be willing to bet that the sum total of all that criminal activity is a serious drag on the nation as a whole. No one act gums up the works, but a bunch of criminal shady activity from many powerful people sure adds a lot of friction to the machinery of American society.
In addition to increasing funding for personal tax audits, I would love to increased funding for small business audits. Most large businesses (S&P500 size) are, effectively, under continuous audit with an IRS team usually located onsite at the business HQ. Smaller businesses, though, can go years without ever having their taxes reviewed. Increase funding for small and medium business audits also!
Don't have much to say on this except to agree that, yes, it is a no-brainer and should be done.
More broadly, the tactic of fighting against laws you oppose on policy grounds by failing to enforce them is generally a dysfunctional tactic, that undermines rule of law in the long term. And ironically, by relieving some of the pressure to change bad laws it can actually result in those laws being left on the books longer than if they were strictly enforced.
These seem like such obviously good proposals, that are both objectively good and politically good. In addition, they are progressive. So why hasn't the Democratic Party embraced them more aggressively?
This connects to Matt's Make Blue States Great Again questions. AFAIK, zero states with income tax and a Democrat state legislature majority have tried pre-filling tax forms. I know that Intuit has lobbied various state Assemblymen and Senators against this. But is that really all it takes to talk Democrats out of what should be a solid Democratic win for good governance?
I wish there were a crystal clear, 10-point national Democratic Party platform that we could point to, with slam-dunk items like this. Then we could either pass them, or hammer Republicans with them when they vote against them.
"The Democrats said, let's make the IRS get off their butts and do your tax work for you, if you tell them to. [Fill in blank of local GOP congressman] and Mitch McConnell voted no."
Lots of Democrats cater to wealthy/upper middle class donors who have more complex taxes and benefit from tax avoidance/evasion - not to the same extent as GOP donors/corporations, but enough to blunt a progressive effort to streamline tax collection.
This would be so much more effective than the current all-out push from certain progressive advocacy groups around HR1. Imagine if the Democratic Party made the DMV tolerable...
That might be more effective from the financial point of view, but the R's are pushing hard for the long-time dream of the base - the reinstitution of Jim Crow, and it matters a lot to the Democrats if they cannot win at the polls because their minority voters are not allowed to vote.
There are a few minor issues around HR1 but the opposition is coming from the Southern right, first and foremost, and the centristy right-wingers who hate the idea of more Democrats getting elected because they think that means more taxes for them. That group is going to hate any IRS reforms like white fire (nasty pun intended), and here we are.
I'm mostly thinking about it from a "do people have a good time or a bad time when interacting with government entities" point of view. Showing voters that the government is good, is probably a good way to win votes for the party that tends to argue for the government to have a larger role. But yes, I would also like to see major reforms to voting rights, possibly eliminating the senate, and proportional representation. It just feels like the democrats always have to work so much harder to persuade voters because interacting with the government is such a pain.
I think this is an easy issue to demagogue with low-trust voters. In theory, a message of "Fund the IRS so it can focus on rich people" is appealing. But it's so easy to puncture the effectiveness of that message with, "Yeah right, do you really believe their *real* plan isn't to send the IRS after you? How gullible are you?"
Multiple comments in here expressing various forms of moral support for TurboTax and its ilk: "TurboTax really isn’t a bad product and is worth it to me" or "I greatly appreciate Turbotax and don't mind spending $39".
People, wake up!
A citizen can "appreciate TurboTax" only because tax-prep lobbyists have convinced Congress to hinder the IRS from making a better direct-efile system. The current IRS offering (free fillable forms) is just OK: better than paper, and it does most of the arithmetic. But further direct-efile improvements are mostly off the table, not for any good reason but simply because Congress has decided to create a market for something (tax prep) that the vast majority of citizens should not have to need. If Congress were to fund the IRS properly and remove the handcuffs, many improvements in the tax-paying experience are possible -- without changing the tax rules themselves (a separate and worthy topic) and even without going the full distance of having the government to just tell you the result (also worthy).
For the vast majority of people the IRS could just do your taxes for you! That's what many countries do. The taxpayer just get a summary in the mail and if they missed something or your situation changes then you can file an updated return.
<i>Eight OECD countries, including Finland and Norway, fully prepare returns for the majority of its taxpayers.</i>
There are more options as well - IRS does the taxes but you can pay TurboTax to see if it can come up with better results. The IRS could potentially send TurboTax (or any other tax preparer, based on your request) the data.
This complicated tax prep bothers me every year when I fire up TurboTax. Particularly when TurboTax they *constantly* try to upsell me on their Max product. That's when it really hits home that this company is just grabbing cash from people so they can enter some crap that the IRS already knows.
Hey—if you really want to stick it to them—have you tried just filing yourself? Like with the paper forms or the IRS’s efile? It’s really not that bad. Especially if you’re really in one of those tax situations where the IRS already has the necessary info. I say if you’re nerdy enough to be here, you’re nerdy enough to try.
Personally I think Intuit is the one making all these memes about how taxes are hard and your high school failed you by teaching you about mitochondria and parallelograms instead of paperwork. They want everyone to think this is hard. And IIRC they lobby the IRS *not* to advertise that you can do this all for free.
Here’s a jig—fill out TurboTax but don’t hit submit. Make a note of if it uses the standard or itemized deduction. If it did standard, it’s super easy to file yourself. Then you can mail or efile the forms yourself and make sure you got the same number. I wouldn’t bother doing that we’d audit every year, but if you’re new to self filing, it’ll at least give you confidence that you’re doing it right and not missing any credits or deductions.
True, but TurboTax really isn’t a bad product and is worth it to me especially since I have a few atypical investments. Was particularly useful when I was freelancing and had my own business. To me it’s worth it not to have to download forms ad acquire stamps.
It’s not that there’s no room for decent tax prep software. It would be nicer though if the IRS told you what you owed and the software was just to check things and estimate taxes if you have a business.
Yeah I hear you. It’s definitely good at what it does and is a lot faster than filling on your own. And for sure—if I had some atypical situations, I’d either be using the software or asking a pro as well.
But hey—for anyone else reading—if TurboTax always tells you to take the standard deduction instead of itemizing, and if your income is all on W2s, it’s really not that bad. Might take you an afternoon the first time and a couple hours each year thereafter. Not knocking anyone who says “meh I’d rather just pay the $60 or whatever”—everybody’s got different thresholds for what they pay for and what they do themselves.
Strong disagree. The forms are incredibly confusing. I'm an Ivy League educated engineer and I gave up on trying to understand them and went back to TurboTax, which has cost me thousands of dollars in fines because it's such bad software.
That's an argument for dumping Turbotax and hiring an independent CPA. I find the forms confusing but not that confusing (the IRS really needs to hire some UI experts), but if you simply can't handle it, you hire a CPA, and stop paying off Big Tax Prep for lobbying Congress to keep the system confusing.
I tried working with three CPAs and found them all essentially useless -- they either didn't understand as much about taxes as me, or they basically wanted me to categorize all of my spending (that is, do 90% of what "doing your taxes" consists of) and then let them know how it went. One promised to fight a massive fine and did basically nothing.
Ya let me clarify. *Most people* have pretty simple tax situations and as described above the IRS already has the relevant information to calculate their payment/refund. I agree with those above saying in those situations it’s be nice if they just mailed you prefilled forms and asked you to confirm—my point is just that for people with simple situations like that, it’s not too bad to file yourself. Your situation sounds more complicated though.
A cool thing about Turbotax is that you can't input income from unemployment insurance on the basic plan, so you need to go up a tier at the time when you can least afford it.
I don't think that's true. Both my kids received UI in 2020, and I helped them with their taxes using TurboTax. When it was all finished you can file using the Free option, just keep telling TT no when it asks you to upgrade.
We even had to wait a couple weeks from when we started to allow TT to add in the changes making the first $10,000 of UI non taxable.
I have a couple quick thoughts. First, I think there ought to be a broader push to fund the financial police. The IRS, FinCEN, SEC, etc. I think the window of opportunity exists if you use the framing around combatting kleptocracy, which seems to have been effective at getting some surprising new bi-partisan policies passed recently. Have you seen anybody framing the IRS funding argument around combatting international actors using the US as a money laundering playground? Second, I think the question of investing in IT systems is interesting. Should more money go towards training and hiring auditors or building IT systems? I've read that Russia has a new, super effective (and slightly scary) tool for cutting down on VAT leakage.
Congress did just act on money laundering last December as part of the NDAA. It didn't generate much talk (Secret Congress!) but people who follow this stuff tell me it was a huge deal.
It did, it was a big deal, and there's more legislation that will likely get passed this year-- for example, people are gearing up to create an anti-corruption rapid response fund with $ from FCPA settlements. But a huge chunk of the stuff in the NDAA was funding for studies on key topics, refining some anti-money laundering regulations, and allowing for the establishment of a non-public beneficial ownership registry. There wasn't any additional funding for financial police. I just wonder if it's possible to frame IRS funding around a money laundering frame because there's a real opening there.
I stand corrected, FinCEN's budget was raised from $136 million to $146 million. I think most people are clamoring for a much larger increase. $146 million seems like probably not enough funding for policing $18 trillion in banking assets.
I already argued to Matthew here that we really should have an distinct bureau under DOJ to handle financial and computer crimes (cyber crimes) - i.e. BFCC - to build it you hire a bunch of nerds and accountants, and transfer the FBI personnel working those areas over to the new bureau.
The tax police at the IRS do need to bulk up to handle all the offshore and shell corp games played by major financial players, but they aren't equipped and really shouldn't be involved in investigating all the other kinds of financial crimes our overlords indulge themselves in.
I think this is basically a no-brainer/what's the holdup issue - I expect we haven't got that because we don't have any congressmen who can be bothered to get involved.
Instead Congress has tended for decades now to keep throwing new missions to existing police agencies who have no expertise in whatever the hell it is Congress has a bug up its ass about this month (cf the War on Terror).
"I expect we haven't got that because we don't have any congressmen who can be bothered to get involved."
Putting aside the obvious - the donor classes, especially the Republican donor class, really hate taxes and the tax police, and would REALLY hate the accounting police.
I mean, another basic issue is the fact that only 7% of congresspeople are under 40 and grew up when the internet was used widely. Beyond that, I think the USG has for a long time emphasized creating IT systems that don't really communicate with each other, in part because of entropy and in part because of privacy considerations. I tend to be a bit leery of increasing the number of agencies, the spaghetti of intelligence agencies is a pretty good showcase of the downsides of creating new agencies on the reg. Not to say that I disagree, just that I think it's appropriate to think long and hard before creating a new agency. But, I just want to emphasize that there is certainly a lot of low hanging (and low-tech) international money laundering fruit that increased IRS funding could address.
You must have missed the realignment over the past 10 years. A large percentage (a majority?) of the billionaires are now Democrats and Democratic donors.
I am glad you mention simplifying the tax code. I suspect based on anecdotal evidence that a big reason for opposition to the IRS is that a lot of people worry that they've entered something incorrectly on their tax forms and that a well-funded IRS will spend their time ruining people's lives over typos.
In order to justify a souped up IRS people need to assume that they will be going after intentional criminal activity - increasing the confidence ordinary people have that their tax return is not going to be reviewable would help achieve that outcome in my opinion.
I think that something that’s missing from the TurboTax conversation is that all this (supposedly confidential) financial information gathering by Intuit seems to be a huge cybersecurity disaster waiting to happen. I don’t see why all this information, which is stored by the IRS anyway, should also be stored by someone else in the vast majority of cases. (Not that the IRS can never be hacked, but I trust the cyber capabilities of the federal government more than Intuit’s.)
Agree with all of this. It's probably my #2 issue behind healthcare. I'd only add the penalties for tax fraud should be higher. I feel like a lot of the tax-gap is simply people making a "business decision" (i.e., tax savings > % of audit * incremental penalties). If we tip the penalty scales - that should close the under-reporting gap without increasing the audit rate and associated IRS fixed costs.
More broadly and culturally and definitely ideally, I wish taxes would be viewed more as a civic responsibility and celebrated. I bias towards transparency so I'd also support tax data being public. Some of the hypocrisy I struggle the most with - even across friends - is this outward charity focus but I know which accountant their working with and his reputation for loophole exploitation.
General (enthusiastic) agreement but two points. 1) Is the IRS absolutely optimizing collections with the existing structures of auditing? 2) (Paradoxically) both times I have been audited the result has been that I had overpaid and the second time the auditor was super friendly. [I had the impression that my name could out of an algorithm, but that he "knew" I was not cheating and was rather embarrassed to have to be doing the audit.]
We've been audited once, getting a letter from the IRS saying we owed them thousands of dollars. After untold hours trying to get an auditor on the phone, the auditor was also super friendly and helpful, and quickly determined that our taxes were right and the original audit was wrong. And our taxes are not at all complicated! So count me as someone who is not on board with the IRS figuring out my taxes for me.
Have had similar experiences. This is how increased funding needs to be messaged. Right now, people think it means higher audit probabilities, which it might. But it should be structured so that it also means lower wait times and sold as such
Doing that in the US seems like a recipe for cranking up the harassment machine and the cancel machine, even though I can see some positive effects would result.
elm
['After all, our very own Postmaster, Louis DeJoy is up to his eyeballs in holdings in shipping companies that compete with the USPS.']
well people would change their behavior and congress would change the tax laws if that is what you mean. Yes your Tinder date would look up your tax return and she would be disappointed that your home office that you said you spend 50k on is just your laptop
Fair but we want our presidents to release their tax returns what about other candidates and what about well everyone. The shame aspect would keep people in line. Journalists would just go though every rich and famous persons taxes and say this deduction is BS. As a result rich people would be honest on their taxes. However, it would mean all of members of the public would have to actually pay our taxes rather than get involved politically to change the laws.
I think one thing this article didn't mention was how to tie this in to Matt's previous discussion of heavy sentencing in criminal law- specifically, how harsher punishments don't impact criminal conduct because what you really need is for communities to think that if they commit a crime they'll be caught. Greater enforcement of tax laws will obviously allow the IRS to capture those funds that they uncover during their investigations, but it will also send a signal to high earners that it will cost them more to engage in dicey tax avoidance than it would to simply pay up front, which may reduce the gap between what the IRS knows is owed every year and what actually comes in. I don't expect that number to be enormous or anything, but greater enforcement would almost certainly have SOME impact on other, non-audited individuals who will ensure they're compliance with tax laws in order to avoid being audited later and having to a) pay more in penalties than they would have paid if they'd complied in the first place, and/or b) go to jail.
I worked for a time in tax policy research after college, and the largest takeaways I have are, as this post states, that the IRS needs a full enforcement budget (one that will, at minimum, pay for itself) and that the tax code should be much simpler than it is. Unfortunately, Intuit and their ilk have gotten an incredible return on millions of lobbying dollars, preventing a true public free file/return-free filing option, and other various moneyed interests aggressively defend "their" tax breaks, leading to the current impossibility of achieving any simplification at all.
The lobbying efforts of these outfits also coincide with the long-term policy goals of many politicians on the right: namely, that anything that makes the public sector as inefficient and as unpleasant as possible is a desirable outcome on the merits, to the extent it reduces confidence in (and indeed increases antipathy toward) the public sector.
I'd suggest the last year provides a rather vivid display of the consequences of such a dynamic.
I quit journalism mid-aughts and, seeking a stable career, started a grad program in accounting. Hiring dried up due to the 2007 great recession, and I ended up taking a job as a state tax auditor.
It was easily the most interesting job I've ever had. Getting to see how businesses work and how many weird ways there are to make money was fascinating. Spend a week at an online store that sells survivalist supplies getting to see every cent in and out. The occupy the next few days with a tiny company that makes millions renting portable toilets to events.
The pay was terrible; benefits - pension, four-day work week - were amazing. It was also very hard. So much business falls into ambiguous grey areas of taxability. You could ask three different supervisors questions regarding whether a particular activity was taxable and might end up with four different, conflicting answers.
I left after a couple years for better pay. Was soon making 3x as much in a respected firm - that was only about 20% as hard as being a good state tax auditor.
I've been looking at the IRS job listings lately out of nostalgia. Pay is actually solid.
Do I understand correctly that you made 3x as much working for a firm that (I assume, among other things) minimizes tax burdens than you made working for the state to make sure businesses didn't cheat on their taxes?
No. I ended up working in an unrelated consulting role.
However, the vast majority of exits from the state tax auditor agency were to firms that specialized in tax audit defense, where people make 1.25-2x the money as auditors to minimize burdens. Like prosecutors becoming defense attorneys.
That makes sense. I've recently been introduced to the weird world of estate taxes and observed two things: 1) the family in question has probably paid the CPAs, lawyers, etc. more, in aggregate, than they actually saved in taxes and 2) they would be perfectly happy if that were the case.
I was curious if the gap between state auditor and private tax-minimizer is really a factor of three, at which point it seems like the only reason to work for the state in the first place would be to get enough experience on the auditing side to get hired by the minimizing side. Like, even if the work is interesting, triple the pay for an easier job would be really hard to pass up.
You find it surprising that the pay is much better at a private accounting firm than it is at the government?
The Trump years revealed to me that something I had always downplayed was actually true -- that there is a vast, almost-invisible ocean of white-collar crime happening every day in this country and that the vast majority of those people will never face any consequences.
I'd be willing to bet that the sum total of all that criminal activity is a serious drag on the nation as a whole. No one act gums up the works, but a bunch of criminal shady activity from many powerful people sure adds a lot of friction to the machinery of American society.
In addition to increasing funding for personal tax audits, I would love to increased funding for small business audits. Most large businesses (S&P500 size) are, effectively, under continuous audit with an IRS team usually located onsite at the business HQ. Smaller businesses, though, can go years without ever having their taxes reviewed. Increase funding for small and medium business audits also!
Don't have much to say on this except to agree that, yes, it is a no-brainer and should be done.
More broadly, the tactic of fighting against laws you oppose on policy grounds by failing to enforce them is generally a dysfunctional tactic, that undermines rule of law in the long term. And ironically, by relieving some of the pressure to change bad laws it can actually result in those laws being left on the books longer than if they were strictly enforced.
These seem like such obviously good proposals, that are both objectively good and politically good. In addition, they are progressive. So why hasn't the Democratic Party embraced them more aggressively?
This connects to Matt's Make Blue States Great Again questions. AFAIK, zero states with income tax and a Democrat state legislature majority have tried pre-filling tax forms. I know that Intuit has lobbied various state Assemblymen and Senators against this. But is that really all it takes to talk Democrats out of what should be a solid Democratic win for good governance?
I wish there were a crystal clear, 10-point national Democratic Party platform that we could point to, with slam-dunk items like this. Then we could either pass them, or hammer Republicans with them when they vote against them.
"The Democrats said, let's make the IRS get off their butts and do your tax work for you, if you tell them to. [Fill in blank of local GOP congressman] and Mitch McConnell voted no."
Lots of Democrats cater to wealthy/upper middle class donors who have more complex taxes and benefit from tax avoidance/evasion - not to the same extent as GOP donors/corporations, but enough to blunt a progressive effort to streamline tax collection.
This would be so much more effective than the current all-out push from certain progressive advocacy groups around HR1. Imagine if the Democratic Party made the DMV tolerable...
That might be more effective from the financial point of view, but the R's are pushing hard for the long-time dream of the base - the reinstitution of Jim Crow, and it matters a lot to the Democrats if they cannot win at the polls because their minority voters are not allowed to vote.
There are a few minor issues around HR1 but the opposition is coming from the Southern right, first and foremost, and the centristy right-wingers who hate the idea of more Democrats getting elected because they think that means more taxes for them. That group is going to hate any IRS reforms like white fire (nasty pun intended), and here we are.
elm
I'm mostly thinking about it from a "do people have a good time or a bad time when interacting with government entities" point of view. Showing voters that the government is good, is probably a good way to win votes for the party that tends to argue for the government to have a larger role. But yes, I would also like to see major reforms to voting rights, possibly eliminating the senate, and proportional representation. It just feels like the democrats always have to work so much harder to persuade voters because interacting with the government is such a pain.
I think this is an easy issue to demagogue with low-trust voters. In theory, a message of "Fund the IRS so it can focus on rich people" is appealing. But it's so easy to puncture the effectiveness of that message with, "Yeah right, do you really believe their *real* plan isn't to send the IRS after you? How gullible are you?"
Multiple comments in here expressing various forms of moral support for TurboTax and its ilk: "TurboTax really isn’t a bad product and is worth it to me" or "I greatly appreciate Turbotax and don't mind spending $39".
People, wake up!
A citizen can "appreciate TurboTax" only because tax-prep lobbyists have convinced Congress to hinder the IRS from making a better direct-efile system. The current IRS offering (free fillable forms) is just OK: better than paper, and it does most of the arithmetic. But further direct-efile improvements are mostly off the table, not for any good reason but simply because Congress has decided to create a market for something (tax prep) that the vast majority of citizens should not have to need. If Congress were to fund the IRS properly and remove the handcuffs, many improvements in the tax-paying experience are possible -- without changing the tax rules themselves (a separate and worthy topic) and even without going the full distance of having the government to just tell you the result (also worthy).
A true expert on the rules limiting IRS innovation could probably qualify some of my comments and complicate the picture (which has changed in some ways recently), but here's one link for the curious: https://www.vox.com/2019/4/9/18301943/last-minute-tax-preparation-h-r-block-turbotax
For the vast majority of people the IRS could just do your taxes for you! That's what many countries do. The taxpayer just get a summary in the mail and if they missed something or your situation changes then you can file an updated return.
<i>Eight OECD countries, including Finland and Norway, fully prepare returns for the majority of its taxpayers.</i>
https://www.theatlantic.com/business/archive/2016/03/the-10-second-tax-return/475899/
There are more options as well - IRS does the taxes but you can pay TurboTax to see if it can come up with better results. The IRS could potentially send TurboTax (or any other tax preparer, based on your request) the data.
This complicated tax prep bothers me every year when I fire up TurboTax. Particularly when TurboTax they *constantly* try to upsell me on their Max product. That's when it really hits home that this company is just grabbing cash from people so they can enter some crap that the IRS already knows.
Hey—if you really want to stick it to them—have you tried just filing yourself? Like with the paper forms or the IRS’s efile? It’s really not that bad. Especially if you’re really in one of those tax situations where the IRS already has the necessary info. I say if you’re nerdy enough to be here, you’re nerdy enough to try.
Personally I think Intuit is the one making all these memes about how taxes are hard and your high school failed you by teaching you about mitochondria and parallelograms instead of paperwork. They want everyone to think this is hard. And IIRC they lobby the IRS *not* to advertise that you can do this all for free.
Here’s a jig—fill out TurboTax but don’t hit submit. Make a note of if it uses the standard or itemized deduction. If it did standard, it’s super easy to file yourself. Then you can mail or efile the forms yourself and make sure you got the same number. I wouldn’t bother doing that we’d audit every year, but if you’re new to self filing, it’ll at least give you confidence that you’re doing it right and not missing any credits or deductions.
True, but TurboTax really isn’t a bad product and is worth it to me especially since I have a few atypical investments. Was particularly useful when I was freelancing and had my own business. To me it’s worth it not to have to download forms ad acquire stamps.
It’s not that there’s no room for decent tax prep software. It would be nicer though if the IRS told you what you owed and the software was just to check things and estimate taxes if you have a business.
LOL too true on the stamps!
Yeah I hear you. It’s definitely good at what it does and is a lot faster than filling on your own. And for sure—if I had some atypical situations, I’d either be using the software or asking a pro as well.
But hey—for anyone else reading—if TurboTax always tells you to take the standard deduction instead of itemizing, and if your income is all on W2s, it’s really not that bad. Might take you an afternoon the first time and a couple hours each year thereafter. Not knocking anyone who says “meh I’d rather just pay the $60 or whatever”—everybody’s got different thresholds for what they pay for and what they do themselves.
Strong disagree. The forms are incredibly confusing. I'm an Ivy League educated engineer and I gave up on trying to understand them and went back to TurboTax, which has cost me thousands of dollars in fines because it's such bad software.
That's an argument for dumping Turbotax and hiring an independent CPA. I find the forms confusing but not that confusing (the IRS really needs to hire some UI experts), but if you simply can't handle it, you hire a CPA, and stop paying off Big Tax Prep for lobbying Congress to keep the system confusing.
elm
I tried working with three CPAs and found them all essentially useless -- they either didn't understand as much about taxes as me, or they basically wanted me to categorize all of my spending (that is, do 90% of what "doing your taxes" consists of) and then let them know how it went. One promised to fight a massive fine and did basically nothing.
Suggestions welcome!
Yes, I used FreeTaxUSA recently and liked it, and may switch from TurboTax.
Ya let me clarify. *Most people* have pretty simple tax situations and as described above the IRS already has the relevant information to calculate their payment/refund. I agree with those above saying in those situations it’s be nice if they just mailed you prefilled forms and asked you to confirm—my point is just that for people with simple situations like that, it’s not too bad to file yourself. Your situation sounds more complicated though.
A cool thing about Turbotax is that you can't input income from unemployment insurance on the basic plan, so you need to go up a tier at the time when you can least afford it.
I don't think that's true. Both my kids received UI in 2020, and I helped them with their taxes using TurboTax. When it was all finished you can file using the Free option, just keep telling TT no when it asks you to upgrade.
We even had to wait a couple weeks from when we started to allow TT to add in the changes making the first $10,000 of UI non taxable.
I have a couple quick thoughts. First, I think there ought to be a broader push to fund the financial police. The IRS, FinCEN, SEC, etc. I think the window of opportunity exists if you use the framing around combatting kleptocracy, which seems to have been effective at getting some surprising new bi-partisan policies passed recently. Have you seen anybody framing the IRS funding argument around combatting international actors using the US as a money laundering playground? Second, I think the question of investing in IT systems is interesting. Should more money go towards training and hiring auditors or building IT systems? I've read that Russia has a new, super effective (and slightly scary) tool for cutting down on VAT leakage.
Congress did just act on money laundering last December as part of the NDAA. It didn't generate much talk (Secret Congress!) but people who follow this stuff tell me it was a huge deal.
It did, it was a big deal, and there's more legislation that will likely get passed this year-- for example, people are gearing up to create an anti-corruption rapid response fund with $ from FCPA settlements. But a huge chunk of the stuff in the NDAA was funding for studies on key topics, refining some anti-money laundering regulations, and allowing for the establishment of a non-public beneficial ownership registry. There wasn't any additional funding for financial police. I just wonder if it's possible to frame IRS funding around a money laundering frame because there's a real opening there.
I stand corrected, FinCEN's budget was raised from $136 million to $146 million. I think most people are clamoring for a much larger increase. $146 million seems like probably not enough funding for policing $18 trillion in banking assets.
I already argued to Matthew here that we really should have an distinct bureau under DOJ to handle financial and computer crimes (cyber crimes) - i.e. BFCC - to build it you hire a bunch of nerds and accountants, and transfer the FBI personnel working those areas over to the new bureau.
The tax police at the IRS do need to bulk up to handle all the offshore and shell corp games played by major financial players, but they aren't equipped and really shouldn't be involved in investigating all the other kinds of financial crimes our overlords indulge themselves in.
I think this is basically a no-brainer/what's the holdup issue - I expect we haven't got that because we don't have any congressmen who can be bothered to get involved.
Instead Congress has tended for decades now to keep throwing new missions to existing police agencies who have no expertise in whatever the hell it is Congress has a bug up its ass about this month (cf the War on Terror).
elm
"I expect we haven't got that because we don't have any congressmen who can be bothered to get involved."
Putting aside the obvious - the donor classes, especially the Republican donor class, really hate taxes and the tax police, and would REALLY hate the accounting police.
elm
I mean, another basic issue is the fact that only 7% of congresspeople are under 40 and grew up when the internet was used widely. Beyond that, I think the USG has for a long time emphasized creating IT systems that don't really communicate with each other, in part because of entropy and in part because of privacy considerations. I tend to be a bit leery of increasing the number of agencies, the spaghetti of intelligence agencies is a pretty good showcase of the downsides of creating new agencies on the reg. Not to say that I disagree, just that I think it's appropriate to think long and hard before creating a new agency. But, I just want to emphasize that there is certainly a lot of low hanging (and low-tech) international money laundering fruit that increased IRS funding could address.
You must have missed the realignment over the past 10 years. A large percentage (a majority?) of the billionaires are now Democrats and Democratic donors.
I am glad you mention simplifying the tax code. I suspect based on anecdotal evidence that a big reason for opposition to the IRS is that a lot of people worry that they've entered something incorrectly on their tax forms and that a well-funded IRS will spend their time ruining people's lives over typos.
In order to justify a souped up IRS people need to assume that they will be going after intentional criminal activity - increasing the confidence ordinary people have that their tax return is not going to be reviewable would help achieve that outcome in my opinion.
Happy 420. 6.9420% Federal tax on weed.
nice
I think that something that’s missing from the TurboTax conversation is that all this (supposedly confidential) financial information gathering by Intuit seems to be a huge cybersecurity disaster waiting to happen. I don’t see why all this information, which is stored by the IRS anyway, should also be stored by someone else in the vast majority of cases. (Not that the IRS can never be hacked, but I trust the cyber capabilities of the federal government more than Intuit’s.)
Agree with all of this. It's probably my #2 issue behind healthcare. I'd only add the penalties for tax fraud should be higher. I feel like a lot of the tax-gap is simply people making a "business decision" (i.e., tax savings > % of audit * incremental penalties). If we tip the penalty scales - that should close the under-reporting gap without increasing the audit rate and associated IRS fixed costs.
More broadly and culturally and definitely ideally, I wish taxes would be viewed more as a civic responsibility and celebrated. I bias towards transparency so I'd also support tax data being public. Some of the hypocrisy I struggle the most with - even across friends - is this outward charity focus but I know which accountant their working with and his reputation for loophole exploitation.
General (enthusiastic) agreement but two points. 1) Is the IRS absolutely optimizing collections with the existing structures of auditing? 2) (Paradoxically) both times I have been audited the result has been that I had overpaid and the second time the auditor was super friendly. [I had the impression that my name could out of an algorithm, but that he "knew" I was not cheating and was rather embarrassed to have to be doing the audit.]
We've been audited once, getting a letter from the IRS saying we owed them thousands of dollars. After untold hours trying to get an auditor on the phone, the auditor was also super friendly and helpful, and quickly determined that our taxes were right and the original audit was wrong. And our taxes are not at all complicated! So count me as someone who is not on board with the IRS figuring out my taxes for me.
Interesting, but the experience does not seem to push in against IRS bills you system.
We could even make it that one choses up front bill vs file regime.
Have had similar experiences. This is how increased funding needs to be messaged. Right now, people think it means higher audit probabilities, which it might. But it should be structured so that it also means lower wait times and sold as such
How about making all tax returns public like in Sweden?
I think that's Norway.
It's Norge. (C'est Norvége.)
Doing that in the US seems like a recipe for cranking up the harassment machine and the cancel machine, even though I can see some positive effects would result.
elm
['After all, our very own Postmaster, Louis DeJoy is up to his eyeballs in holdings in shipping companies that compete with the USPS.']
well people would change their behavior and congress would change the tax laws if that is what you mean. Yes your Tinder date would look up your tax return and she would be disappointed that your home office that you said you spend 50k on is just your laptop
Have to admit I instinctively hate that idea.
Fair but we want our presidents to release their tax returns what about other candidates and what about well everyone. The shame aspect would keep people in line. Journalists would just go though every rich and famous persons taxes and say this deduction is BS. As a result rich people would be honest on their taxes. However, it would mean all of members of the public would have to actually pay our taxes rather than get involved politically to change the laws.
I think one thing this article didn't mention was how to tie this in to Matt's previous discussion of heavy sentencing in criminal law- specifically, how harsher punishments don't impact criminal conduct because what you really need is for communities to think that if they commit a crime they'll be caught. Greater enforcement of tax laws will obviously allow the IRS to capture those funds that they uncover during their investigations, but it will also send a signal to high earners that it will cost them more to engage in dicey tax avoidance than it would to simply pay up front, which may reduce the gap between what the IRS knows is owed every year and what actually comes in. I don't expect that number to be enormous or anything, but greater enforcement would almost certainly have SOME impact on other, non-audited individuals who will ensure they're compliance with tax laws in order to avoid being audited later and having to a) pay more in penalties than they would have paid if they'd complied in the first place, and/or b) go to jail.
I worked for a time in tax policy research after college, and the largest takeaways I have are, as this post states, that the IRS needs a full enforcement budget (one that will, at minimum, pay for itself) and that the tax code should be much simpler than it is. Unfortunately, Intuit and their ilk have gotten an incredible return on millions of lobbying dollars, preventing a true public free file/return-free filing option, and other various moneyed interests aggressively defend "their" tax breaks, leading to the current impossibility of achieving any simplification at all.
The lobbying efforts of these outfits also coincide with the long-term policy goals of many politicians on the right: namely, that anything that makes the public sector as inefficient and as unpleasant as possible is a desirable outcome on the merits, to the extent it reduces confidence in (and indeed increases antipathy toward) the public sector.
I'd suggest the last year provides a rather vivid display of the consequences of such a dynamic.
"Broken windows for rich people" should be its own movement (a sub-Substack?). Good marketing of an important idea that goes beyond tax policy.