At our law firm, we charge between $75 and $550.
1 Like
For a while our taxes were done by the CPA side of a financial services firm as one of the perks of Hâs job. After retirement, he discovered they screwed up the final year and we over paid by quite a lot.
Weâre back to TT which I think H got at a discount thanks to Fidelity. He likes being able to import everything needed. Itâs a far cry from the years when I did them for us by hand. Even though our return is more complicated it takes a small fraction of the time to complete.
1 Like
There is really no reason why the federal government cannot provide a free e-filing service for citizens, including electronic data filling. The only reason why we donât have this is the lobbying from HR Block and Intuit. Other countries do it.
I support a free e-filing service, plus free postal service banking accounts and email accounts through the post office. People should not be forced to use private companies for the conduct of government business and requirements.
5 Likes
1 Like
There should be no minimum income threshold for tax filing services. If the law requires you to engage in a certain tech interface (which basically is what we have now), then there should be no income qualification barriers. If you make over 72K why should you have to pay to file state taxes etc.
Iâm not some pinko commie BTW, Iâm actually a registered Republican although I really have no political home these days.
4 Likes
Agreed. There isnât even a reason why the federal government could not (pre-)file tax returns on our behalf. The IRS has pretty much all the info needed to do so.
It is now done is some European countries. The government sends you a pre-filed tax return (typically electronically). If you are OK with it, you just (e-)sign it. Then you are told how much you owe.
3 Likes
You can thank lobbying by tax preparation (software) companies for limitations on what the IRS can do to help people calculate their federal income tax: Inside TurboTaxâs 20-Year Fight to Stop Americans From Filing Their Taxes for Free â ProPublica . I.e. basically regulatory capture by the relevant industry.
The IRS does not necessarily have everything needed for complete tax returns for everyone, but many people have relatively simple situations (e.g. only W-2 and maybe 1099-INT/DIV income, no deductions beyond standard or not already reported to the IRS, etc.) where it would be possible for the IRS to issue a preliminary return that matches what the actual complete return should be.
1 Like
I believe the free file has an income limit.
IRS doesnât have all the info it needs. I get a few ânot reported to IRSâ items every year. Out income is not that unusual. For higher income households, there will be more of those not reported and IRS has to rely on voluntary reports.
I did our taxes at the beginning of my career as a professor and then when I was a salaried employee of an investment bank and then a family office. But when I started my own company and then created a corporate structure with a C-Corp and two LLCs, I had an accounting firm do the tax work for both LLCs (operating companies with employees) and the C-Corp (which only employed me) and then had them do it for me. It turned out that if they were also doing my taxes, they found ways to use the setup to reduce my taxes that I would not have found. My tax life is now much more complex, with a dynasty trust with subsidiaries and some rental real estate, I couldnât possibly make the time to do the taxes and would miss things that they catch. Oh, and letâs not forget foreign income and therefore foreign income tax credits (a totally impenetrable form) and AMT (some years Iâm in, some Iâm not). The effort and the pain. Glad I use an accountant.
2 Likes
As @ucbalumnus pointed out, the IRS could pre-file preliminary tax returns with what is shared with them. And if you had ânot reported to IRSâ items then you would just amend the preliminary return to add what needs to be added.
Again, that is how it is now done in some European countries. A majority of people only have simple forms of income (wages and incomes reported by financial institutions). Those people just have to sign that they agree with the preliminary tax returns. A minority of people have more complex situations. They have to amend the preliminary tax returns before signing them.
Of course, minimizing the number of potential ânot reported to IRSâ items would be beneficial. This would improve compliance.
We could also simplify the tax code. Do we really need a system that allows for non-standard deductions?
3 Likes
Some states and localities with individual income taxes also allow for free online filing. Issue with them though is they provide little/no guidance in completing the forms. Not sure how much guidance is provided with the free federal options though to the extent they are provided by tax software companies, they presumably provide at least some.
Bigger issue from my perspective is the complexity of the tax codes. I can file local income tax returns online. Its very simple because the local tax rules are simple. They are not seeking to influence behavior just collect revenues to run local government. That is less true of state income tax codes and is totally the opposite for the federal income tax code.
2 Likes
Politicians and lobbyists in the US have long since figured out that giving a government subsidy to someone or for some action by tax credit or deduction is more effective for the someone or action being subsidized, since removing it is politically more difficult (âraising taxesâ versus âcutting wasteful unnecessary government spendingâ).
Doing government subsidies by tax credit or deduction also makes them more valuable for high income people than low income people (most tax credits are not refundable, and deductions are more useful in higher tax brackets). This is sometimes an intended effect.
2 Likes
Maybe iRS doesnât want to give out how little they know. People with means can exploit it to their advantage.
I assume that the IRS gets an electronic copy of all the tax forms we get, automatically files a shadow tax return, and then automatically compares what we file against that shadow return looking for discrepancies. Donât you think so?
That said, I have been surprised that for some things the IRS is way behind their European counterparts. For example, cost basis reporting for capital gains by financial institutions was not made mandatory in the US until fairly recently (2011?). In some European countries, cost basis reporting by financial institutions was already mandatory over 30 years ago.
When I was in Germany my tax return had maybe three questions. One was how far I commuted. I couldnât believe how simple it was and Iâd been filing the simplest forms in the US before then.
We struggled all weekend with Turbo Tax and my business. We switched cars and no matter what we put in regarding whether the old car had depreciated or not Turbo Tax wouldnât accept it. My husband finally just said we didnât use the *#&@ car in January. I donât know whether we lost $17 or a lot, but thatâs my husband and taxes.
The one year we used an accountant (because we had been in Hong Kong and had foreign income), it didnât end up being any less work for us.
2 Likes
In Europe, they rely more heavily on VAT than in the US. Income tax plays a smaller role. VAT is much simpler to collect. It is less progressive IMO.
I am not as wealthy as to have many tricks to hide my income and not really familiar with all the tricks. But I am sure there is more than getting info from brokerage firms and there are hidden incomes. Just guessing from the way IRS dangles carrots and sticks to force the wealthy to fess up.
WellâŠclearly the IRS has something. We have gotten âcorrectionsâ from them with either a larger refund or a larger amount owed.
1 Like
They can cross check with docs that are filed with them (such as W-2s and 1099s). People with wage income and investment income covered by 1099s will have a tough time under-reporting income. People who work for themselves and get paid in cash will have an easier time (though how you get paid doesnât change whether its taxable).
I try to be very honest about my cash income, but if I donât write it down right away I sometimes forget about it, or I canât remember how much we had agreed on.