Worth it? Am I understanding this?

The tax preparer lobby also wants it this way.

 

I got fed up with having to pay for tax software, so this year I decided to use the IRS free fillable forms. They do some of the simple math automatically, but they are missing key calculations. I followed along with my return that tax software generated last year. It was still extremely difficult to make sure I was doing it correctly, and I had to resubmit three times because of various issues. I have a master's degree in an engineering field, and I work with government specs all day for my job, so I should be good at math and figuring out bureaucratic paperwork. I don't think I could have done it correctly without last year's return as a template. My tax situation is about as typical as it gets.

I would guess the vast majority of Americans (including myself) would not be able to do their taxes without help from software or a person, at least not without extreme difficulty.

 

I used Credit Karma last year. It did everything i needed for the full form.

It was freeish. You had to sign up with their free credit watch service, and set up a savings account with them, though that last part might have just have been to get direct deposit of the refund. I only put a dollar into that account.

I used to use TaxAct, but their cost jumped from $20 to over $70.

 

Years ago when my taxes were complex enough to require a tax specialist, I'd first try myself (armed with last year's return as a guide) but lo' and behold the specialist would invariably find something I'd overlooked or a new twist the the codes. Later on, as my situation became less complex, decent programs came out, but... being ever-so thrifty, I armed myself with IRS Pub 17 to ensure I'd availed myself of the best strategies (Pub 17 is a labyrinth of codes, exceptions, and snakes nest of intertwined rules).

I've since come to love and trust the commercial programs now available. Importing/exporting previous years' data alone saves much angst and potential for error and the dynamic spreadsheet nature allows running "what if" scenarios.

Warehouse clubs etc usually have very palatable pricing for numerous levels of programs (especially at the end of the year, even more-so than near the tax deadline), so I'd never ever so much as even consider not shelling a few bucks to spare myself the agony of doing it manually (aaaargh)!

 

The price isn't the problem, it's the principal of it. The tax code shouldn't be so complicated that it requires third party software. It doesn't need to be. And even without simplifying the tax code, the IRS could do a lot to simplify the process, since they already know most of the information we have to report to them when we fill out our taxes.

For example I almost forgot that I sold a savings bond which generated a 1099. The bank already sent it to the IRS, and if the IRS had my forms pre-filled with my W-2 and 1099s and whatever else they get, I wouldn't have forgotten. It would save time and reduce errors.

In Colorado, the state has a fairly good website for doing your own taxes. It guides you through filling out the forms, and you just fill in the values and submit it. It doesn't hold your hand as much as tax software, but the process is linear, and most people should be able to figure it out. There are just about three or four pages of fields to fill out, and on two of the pages most of them don't apply to most people.

 

Agreed.

But it is what it is and, until changed (despite principals), the less anguish the better!

BTW: Although they were initially one of the more astute programs (properly handling conversions/re-classifications etc) I became fed up with TaxAct pricing jumps and now am a happy Turbo Tax user.

 

It's great that we have to go through this whole ordeal of filing taxes but if you are off by a penny they will let you know for sure. If they know already, then why can't they just do my taxes every year and send me a refund or a bill?

 

They could, but Congress doesn't let them. That was even before funding cuts reduced their work force.

 

They don't already know everything to figure my taxes. And never have.

And while the portion they do know keeps increasing, much of it is reported by the other parties too late for them to process in time. Reporting errors are spotted well after the normal filing deadline.

 

Im willing to move the deadline later if it means no longer having to file taxes.

 

They don't know all your deductions. Non-cash charitable ones don't get reported. Neither does your health insurance nor doctor send in what you paid to the IRS. I'm sure there are others.

 

If the IRS prepared your taxes without any input from you, imagine how many errors they could generate. And you would never know about them, so they would continue on. I have a rental property, and need to tell them how much rent I take in and all the expenses I pay. How would they know otherwise. Be careful what you wish for.

 

I'm not willing to move to the absolutely comprehensive reporting of nearly every financial transaction (e.g. nearly all retail purchases, including their business or tax purposes) needed to achieve this. It would be a massive privacy intrusion.

And as Trollbait mentioned, it will still miss non-cash contributions and allowances.

 

Obviously they don't know everything. But they could figure out what they have information for, and ask you for everything they don't. It would still be half as much work as we have now.

 

Your employer can mess up on the W-2. How would you be able to check without getting a copy? If you get a copy, why not just report it if you are going to have to report other stuff?

There is also another factor to consider, if Congress and the accountant lobby ever allowed the IRS doing the work; cost. It is going to take more man hours for the IRS to consolidate all the info they have on an individual's taxes, than having the individual doing it themselves.

 

Good point! Whatever the government does, cost more than when the private sector does it. And, I can't think of anything that the government hasn't screwed up since the Manhattan Project. They can't even count ballots!

 

For most people, they do, as far as I can tell.

Not so much so if you’re self-employed, for example, or own a company.

However, if your work for a medium-to-large company is your only major source of income, other than bank and investment interest, then they pretty much have all the info they need to fill out your taxes for you. After that, you can tweak them to account for a few little things they don’t know about, like, say, deducting sales tax.

 

The income by wages may be known to them, but they never know deduction items and tax credits, in fact, taxpayers often do not know about deductions and credits unless being pointed out by the CPA or tax software. While my kids were in college, I basically paid zero income tax after all the deductions and credits. If I just let them take a percentage of income by wages and never filed the tax return, I would have ended up paying thousands of $$$ every year unnecessarily. Although that all have changed after kids are off of my return.

 

Another reason Congress won't shift the work to the IRS is that it would make it harder for the wealthy to cheat.

Virtually every filer will have some type of state tax to consider. With other possible deductions, everybody is going to have to figure out whether to go with the standard deduction or not. Individuals will still have to do work when it comes to filing.

In the case of EZ filers, we would now be spending tax dollars to professionally file those.