In taxes, one desires to pay as little as possible. Whereas the tax collector desires to collect as much as possible. Letting the IRS do your taxes is abetting a conflict of interest, and not to your benefit.

Elvis let the IRS prepare his tax returns. That practice contributed to his eventual bankruptcy.

I used to do tax returns as a volunteer on a military base. The IRS provided the software which is not exactly turbo tax. It is fairly sophisticated and requires some training to understand and use.

The IRS has always offered to calculate your tax for you if you don’t know how to do it yourself.

I’m sure a lot of rice bowls are being threatened by this shift.
Truth is, that the tax code ought to be simple enough for almost anyone to do their own, with free software provided by the IRS.

Now, business owners are different. They need professional help.
But if you are an employee or retiree with ordinary sources of income, it just isn’t that difficult.

I'll forward the guess that Appelbaum wants to get paid and will refuse to 'be a good good citizen' if that involves him working for free.

"But to comprehend why liberals are in high dudgeon over this, it's important to remember that, for them, paying taxes is the ultimate act of patriotism, other than perhaps voting."

No. Forcing others to pay more taxes is the height of patriotism. Actually paying taxes themselves is stupid and unAmerican.

The IRS has always offered to calculate your tax for you if you don’t know how to do it yourself. ~ Isab at July 27, 2021 5:13 AM

Akin to the thief offering to guard your house while you're away.

Truth is, that the tax code ought to be simple enough for almost anyone to do their own.... ~ Isab at July 27, 2021 5:13 AM

It oughta be, but it ain't.

But if you are ... [a] retiree with ordinary sources of income, it just isn’t that difficult. ~ Isab at July 27, 2021 5:13 AM

I know a number of elderly retirees who struggle with their taxes. Social Security is taxed. Capital gains as they cash in long-held stocks are taxed. Quarterly taxes have to estimated and paid by retirees who live on liquidating savings.

A few years ago the IRS refused to admit or exempt errors its own advisors made in advising people on filing their taxes. If the IRS gave you bad advice, you stilled owed the IRS a penalty if you followed it. Just wait until that bad advice is hard-coded into the filing software.

"Nobody understands the U.S. tax code, a huge, complex, mutant organism kept in a heavily guarded basement section of the Internal Revenue Service building. 'Don’t go in there,' the guards warn people, 'the tax code.' At night they throw meat to it." ~ Dave Barry

Seems to me that the very people most likely to accuse their opponents of being "apologists for slavery" are also the very people in favor of requiring people to serve others for free.

The truth is HR Block, Turbo Tax and the like would lose half their business if the tax code was simplified. They have every incentive to make it more complex.
I don't trust the IRS but I also don't trust Turbo Tax to not lobby to make tax code so confusing you need them to do it for you.

“I know a number of elderly retirees who struggle with their taxes. Social Security is taxed. Capital gains as they cash in long-held stocks are taxed. Quarterly taxes have to estimated and paid by retirees who live on liquidating savings.”

Yes, and the smartest thing you can do when cashing out part of an IRA, is to request that they withhold 15 percent for the IRS.
You can do the same with other SS income and retirement income if you want to avoid the quarterly payments.

Yea, I know a lot of people who struggle with basic arithmetic and reading comprehension too.

Truth is, for 95 percent of tax payers, it is cut and dried plug and play. Your investment documents, salary documents and retirement statements come with labeled boxes to put into the IRS forms that identify exactly which amounts go where.

The tax preparation industry is a putrid cousin of the extended vehicle warranty industry.

Under the Trump tax cuts, the standard exemption is so large that no one except for the rich, the foolhardy and again, business owners, needs to itemize.

Truth is, that the tax code ought to be simple enough for almost anyone to do their own.... ~ Isab at July 27, 2021 5:13 AM

A seductive idea that is totally unrealistic given the complexity with which humans conduct their lives and financial affairs.

As a tax attorney who has spent the last 8 years in the tax and accounting world, including a couple of tax seasons with H&R Block, and having notified the IRS of math errors in some of their guidance documents, my observation is the tax code complexity is a function of horrible wordsmithing by the Code writers (that almost requires someone trained like me to understand it), the immense complexity of financial arrangements and trying to match realization and taxation of income, and the limitless inclination of Congress to try to turn revenue raising into some cockeyed and not altogether innocent motivational and demotivational system of controlling people's behavior.

If you are a simple wage employee who gets a W-2 and not much else, maybe a 1099 or two, your taxes are simple. But it ends about there. Need to itemize? More complex. Have a sole proprietorship? More complex. Partner in a partnership? Much more complex. S-corp shareholder? More complex. Have employees? More complex. Own rental real estate? More complex. Foreign source income? More complex.

There is no way to simplify it without making it less flexible, less fair, and more draconian.

The tax preparation industry is a putrid cousin of the extended vehicle warranty industry. ~Isab at July 27, 2021 6:28 AMHaving been one of those H&R Block guys sitting in a cubicle trying to make sense of every shoebox or folder full of random receipts and documents brought in by someone off the streets for a couple of tax seasons and piecing together what their year was like financially, I'm not totally unsympathetic to your views here. At least let me point out that they don't inundate you with unsolicited phonecalls every year.

A big chunk of our clients are those terrified of math and unable to work their way through detailed instructions. It's amazing how many Americans fall into that category. What the tax prep outfits are selling there is peace of mind, or really, lessening of anxiety.

Then there are those who can't manage their money, and so are anxious to get their refunds. So anxious that they pay a premium to get their hands on a diminished percentage of the money earlier. It's crazy how many people fall into this group. A simpler tax code will not help these people. I hated selling those early refund services, and never voluntarily offered them unless asked. The companies love to push those because they are moneymakers.

Then there are those with truly complicated returns. They are actually benefitting. Cheaper than hiring your own accountant or attorney, and getting guarantees on penalties for errors by the preparers.

Then those who haven't filed for years, and are trying to get caught up and 4 or 5 years of returns prepared.

And those people don't think they need any documentation but should just wing it based on their memory.

And then there are those who are trying to run a fraud on the IRS, and think they can get some leeway or lesser audit attention if their return is prepared. People who have "dependents" whose numbers and social security numbers vary year to year is a classic. When we saw these things, our instructions (and ethical responsibility is) to turn them away and refuse to do their returns.

We employees got paid by the complexity of the returns, based upon the number and types of forms needed. How much kept being lowered every year to draw in customers, but those early refund services more than made up for it to the company.

What do I do? In complex years, I'll buy TurboTax. Otherwise, I put it all into Excel to check my math, and just do it by hand.

All you have to know about the morality of current tax code is contained in this sentence:

If you overpaid last year's taxes such that you got a refund this year, that counts as income on this year's taxes.

Set up by the same class of people as run national elections, the VA as they let people die to reduce their workload and pay for private security while defunding police.

"If you are a simple wage employee who gets a W-2 and not much else, maybe a 1099 or two, your taxes are simple." ~Ruralcounsel

Rural, that is the vast majority of Americans. Most don't even have a 1099.

I have had the state not see a check I sent them so they said I owed $800. Had to fix it. past 5 years the IRS has made mistakes after I send in my returns.
I think a lot of the complexity is due to Congress trying to manipulate people to "do good" or not do something. They should just stay out of it.

If you overpaid last year's taxes such that you got a refund this year, that counts as income on this year's taxes.

That's not true. Federal tax refunds are not taxable. Period. What they are is a sign that you were an idiot to loan your money to the federal government for a year without getting any benefit.

It's only true if you get a state tax refund (from state taxes which you probably deducted on your previous tax year federal return)and then it counts as income on your current federal tax year.

Ben,

Exactly. No disagreement there.

Though anyone with a savings account or any investments probably gets a Form 1099. So probably lower middle class and upward. Contractor? A 1099-MISC.

Oh, and back to the refund question. The state tax refund ONLY counts as income federally if you itemized your state taxes as a deduction. If you took the standard deduction, it doesn't.

Oh, and radwaste ...

If they pay you any interest on your refund (because they were slow getting it to you) you will be taxed on that interest.

This reminds me of Kissinger's comment on the Iran-Iraq war: "Too bad they can't both lose". It's a false equivalence to say the IRS is competing with Intuit and others. Intuit and others are offering expertise and convenience. If the IRS can make their processes more convenient and easier to understand, does it matter that it harvests some of the providers' low hanging fruit?

Rural,

Less than 20% of Americans have a brokerage account. So 80% don't need to deal with a 1099-DIV.

70% do have a savings account. The median value in that account is $3,500. The average interest rate is 0.06%, so less than $2 in interest at the median. I.e. most people don't get a 1099-INT.

46% of Americans don't have a retirement plan of any kind.

Over 70% of workers are not contractors and only get a W-2.

That was Isab's point. About 50% of Americans only have a W-2 and thus don't really need your services. Of course now that the IRS wants to get into the welfare business I may need some help figuring out just what nutty stuff they've been up to.

"That's not true. Federal tax refunds are not taxable. Period."

Tell Intuit. They collect this info to determine if you over-withheld and are subject to that penalty. Feel free to call that penalty, for dealing with taxes improperly, something else, as it goes to, you guessed it, the IRS.

I get the detailed difference. Sorry.

Ben,

FYI - Just because you don't get a 1099 (say because the amount was small) doesn't absolve you of the legal responsibility of reporting it on your return. Just sayin'. Small potatoes though.

I never said that most taxpayers need the tax preparers. But they seem to want them. No matter how simple their returns are ... so Isab's point about simplifying the code is just wrong. It won't make much difference in who comes in the H&R door, because they aren't there because of complex code, they are there because they are afraid of the IRS enforcement. That's why our system is "voluntary." Just ask the IRS.

Hey, I get it. I think they are wasting their money too. (At least in the past if they itemized they could write off the tax prep costs. No more.) But it's laziness or fear that drives most of them, not complexity.

BTW, radwaste, they don't assess penalties because you over-withheld (paid too much tax). They assess penalties for under-withholding (not paying enough). If you are getting refunds, you are not too likely to be over-withholding. And you have to have underwitheld by a reasonable margin before a penalty kicks in.

If Intuit asks about the size of your refund, it's because they are trying to save you money by lowering the withholding. Not because you are getting taxed on it.

Ben,

And for all those taxpayers who don't get a 1099 and don't have a retirement plan?

Welcome to the SSA-1099.

For those people collecting social security benefits.

Agreed on it not impacting the bottom line of tax preparation companies. Only 10% of returns are done by hand.

It would be nice if things were cleaned up and simplified. It would also be nice if schools taught real life basic skills like how to do simple taxes. But even if all that happened it probably wouldn't change the economics of the tax prep business.

✔ Criticas at July 27, 2021 8:44 AM

Hey, ruralcounsel?

Here's the entire Help page from Intuit:

State and local tax refunds

If you're wondering why this is listed under income, it's because the IRS may consider your state and local refund taxable if you got a state and local income tax deduction on last year's federal return.
You don't have to do anything-we'll figure out if it's taxable for you. But if you want to know more, here are some of the ways we determine your situation:
State and local income tax refunds may be taxable in the year you received them if all of the following occurred:
- You got an itemized deduction for state and local income tax in the prior year.
- You received a benefit from taking the deduction. For example, the deduction increased your federal refund or reduced your tax liability.
- You received a state or local refund, even if you didn't receive a 1099-G.

Your state and local income tax refunds are not taxable if any of the following apply: - You took the standard deduction in the prior year (you did not itemize your deductions). - You had negative taxable income (your deductions exceeded your adjusted gross income). - You itemized deductions, and elected to deduct state and local general sales tax instead of state and local income taxes.

So. State and local refunds can be taxed.

Rural told you that, Rad.

"It's only true if you get a state tax refund (from state taxes which you probably deducted on your previous tax year federal return)and then it counts as income on your current federal tax year." ~ruralcounsel

"Rural told you that, Rad."

Yeah, gotcha. Being mad and confused, I just thought I'd post where I got the idea.

Thanks to both of you.

I understand Rad. I'm still grumpy about how they handled the covid checks. What a mess. And yes Rural I understand the real people to blame are congress. But the IRS's hands are in no way clean with this sort of thing.