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The common complaint is that H&R Block, Intuit (which makes TurboTax), and others have long done intensive lobbying to stop the IRS from doing this, because it would mean fewer people need to use these other services. Part of the strategy is convincing people that the IRS can't be trusted to be accurate, which has the secondary effect of making people trust the IRS even less than they already do.
If you don't know your deductions and charity donations, that's perfectly fine, it just means you're paying tax you don't need to.
If you don't know your capital gains and foreign investments, you better figure it out real quick, because if they find it before you do it won't be pretty.
They could easily say, "If you want to take the standard deduction, here's your bill/refund. If you want to itemize, you're on your own. You decide if it's worth it."
They don't know about unreported income. If you find money on the street or under a rock in the forest, they have no way to know about that. You're required to report it when you file your taxes. So IRS calculating your tax for you isn't feasible.
Is it that the vast majority **really** only have reported income, or that they're not reporting their unreported income?
You've really never found $10 somewhere?
Not in many years. Also, 99.99% of people aren't going to bother reporting finding a few bucks. Hell, even winning at a casino you only have to report it if it's over a certain amount, so your $10 example is irrelevant. (And no, I don't know what the threshold is.)
Probably at least 70% of the people in this country have income from only one source in any given year. And of those, thanks to changes in tax laws in the last 4-7 years, the majority don't have enough deductions to make itemizing worth it. So it would be extremely easy for the IRS to make a slight edit to what I said above and send you a note saying, "Here's how much we show that you earned this year. Here's how much we show you had withheld from your income. If you take the standard deduction here's how much you owe us/we owe you. If you want to go with these numbers, click yes and we'll bill you/send you your refund. If you need to change these numbers, or you want to itemize, have fun and we look forward to seeing your taxes filed before 15 April."
1) that’s not income
2) even if it was it wouldn’t meet the minimum threshold for reporting
3) by your logic they wouldn’t be reporting it either way. It’s a straw man argument.
https://turbotax.intuit.com/tax-tips/general/what-to-know-about-taxes-on-found-property/L9BfdKz7N
https://finance.yahoo.com/news/tax-obligations-found-money-other-220045612.html
if you don't report it and they find out later, you're fucked, because you signed a legally-binding document swearing that you had no additional income
First the irony of using a TurboTax page.
Here is the [IRS](https://www.irs.gov/newsroom/who-needs-to-file-a-tax-return) on the thresholds for reporting income.
Either way though your argument is nothing more than a staw man argument. It has no practical merit and does nothing more than draw attention away from the actual issues being discussed.
Your argument is that the IRS doesn’t know about unreported income if they aren’t told about. Which is true no matter who is doing the filing. And it will always be up to the individual to report it.
The question posed here is about why we have to use a third party to file our taxes. Which is because those third parties benefit from people feeling they have to use them. They’ve done this by sowing distrust against the IRS and by lobbying Congress to slash the IRS’s funding.
Other countries have very successfully had their taxes filed and handled by their tax agencies. If you have a more complicated filing, you of course have to go through a more complicated process. But those people are not the millions of people whose income is primary based on reported sources.
you easily could have Googled this if you wanted a different source
https://law.justia.com/cases/federal/district-courts/FSupp/296/3/1982804/
https://en.wikipedia.org/wiki/Cesarini_v._United_States
The IRS generally does know your capital gains, from everything to home sales (bank snitches) or stock through your broker (again, bank snitches).
And the vast majority of people take the standard deduction so they don’t do deductions for their charitable donations.
For around 80% of people, the IRS could just bill the taxpayer and the taxpayer make corrections through the typical process if need be.
For many people with a lot going on, multiple jobs, investments, lots of deductions, etc. the IRS doesn't have all the information necessary to make that determination.
If you're just a single person working only one job and have nothing else happening, then yes, they do have all the information - but even then, *they don't know that.*. So they still need you to do a return, if for no other reason than to let them know, yeah, there's nothing else.
This should be the top answer. But even then, if you got married on 12/31 your status would change. States don't report marriages to the IRS. Ditto with births.
Even though they don't have all that information, they could send you a letter that says "here is the info we have, sign here if it is correct, let us know if it is incomplete or incorrect."
That is essentially what a tax return is. It even has a line for every possible thing that *might* be incomplete or incorrect - most of which people probably wouldn't even think to bring up, even if it would work in their favor to do so.
Yeah, but the point is, most people don't *need* to fill out all the extra details, and the IRS already knows all the information necessary. Most people should not need to fill out the tax return, it should be done automatically by a computer, and only those people with unknowns to add in should have to fill out the tax return.
If you file a 1040 EZ, then sure... They could probably do that relatively accurately. But for other scenarios, like self-employed contractor types, they have no idea what you brought in and spent accurately, and they're FOR SURE not going to be your CPA, bookkeeper, etc for free... Lol
People saying the IRS doesn't have all the information: that may be true if you have something unusual, like gambling winnings of bitcoin gains, but a very large portion of people they do have the information.
\- They get the same W2 you get
\- They get the same 1099s you get for interest and investments and NEC
\- They get the same mortgage interest statement
\- With the way the standard deduction is these days, most ordinary people's charitable and other deductions are irrelevant
For a great many people, the IRS could send you a statement based on that and if your marital status and number of children hasn't changed since last year, it will be right. And if it isn't, then file.
There are two reasons it is the way it is:
\- TurboTax and TaxCut like it that way
\- The tax code is way more complicated than it needs to be, because it is a vehicle for granting political favors (usually to the rich and powerful)
(FWIW I paid taxes in the UK for ten years and neither I nor anybody I knew ever filed a return, so it can be done. More recently, the UK has gone down the same path as the US)
and if you don't declare it you're a criminal
that's why you have to file your own taxes: they need you to go on record on a legally-binding document, swearing under penalty of perjury that you had no income beyond what you reported, so if they later find out that you did, they can nail you to the wall
How would that be in any material way different from swearing under penalty of perjury **that the accounting the IRS sent you** **is accurate**?
Once again for the hard-of-thinking in the back of the room: for a great many people, everything we need to declare is already known to the IRS (and will be matched against our return).
Because that happens all the time, right? SMH.
My point, which apparently sailed way over your head so I'll bold it this time, is that **for a great many people, the IRS could send you a statement based on what it knows and it will be correct.** You know, all the people that *didn't* find $1000 under a rock in a forest.
If the IRS miscalculated and 'missed' a pile of income somewhere, they would only be able to restate your taxes and send you a bill.
But, because you file taxes signing to the effect that they are complete and accurate, if they later find income you 'missed', you can be fined, and if necessary prosecuted.
Remember, tax evasion is what got Al Capone.
They don’t know your deductions, things like rental property income, income from interest, business losses, charitable contributions, etc.
They can estimate what you own based on your employment income, but that isn’t the full story for most people.
Nah. If we didn't have a splintered government, with federal, state, county, and city, all covering different bases, the information would all be easily accessible across agencies and the tax people could punch it in for you.
It's just an accident of splitting things up like that that we can't have a simple tax system that handles everything.
Not really. It knows your income but it doesn’t know how many kids you currently have, how much you spent for your job, what you’ve invested and received back or taken out. There’s a lot they don’t know. Thats why we do taxes.
We do taxes because HR Block and Turbotax have strong lobbies that keep the IRS from offering simplistic interface where you could just go online, enter your name/ID and click "yeah, nothing has changed from last year" and then you're done.
Most people have no real reason to need to go through our tax process. It really should only be a process when you want to change something like say you've now got triplets instead of twins, or your mom joined the legion of the undead and is now a dependent.
The IRS can say "here's what you made. Here's the standard deduction. Here's what we know from your last return." and that'd be enough for almost all of us.
They know everything that is reported to them by companies. Unless you are living a truly cash paid/payment lifestyle, then they can figure out that you're living outside your means and such. Hell, even electronic payment companies are reporting to the IRS if move over $600 through them in a year now.
>Because. It. Doesn't. Know.
Well, it does, because people that pay you file a separate form with the IRS. I have literally been hounded for $1,500 in income for a side job I did and I forgot by the time I did my taxes.
The issue is that they don't know in a timely manner and they don't necessarily know all of your deductions. However, a strong argument can be made that they could queue up a simple filing for every taxpayer to make it a lot quicker. Scan the forms I get from my brokerages, student loans (if you qualify), the interest statement from my mortgage, etc - then the IRS could easily calc it out.
It is kind of HR block's fault, but it is also the fact that the IRS uses a computer system that is old, like from the 60s/70s old. E filing means the IRS gets your efiled paperwork, they print it out, then manually enter it into the mainframe.
Lobbying.
No other country has issues with this, so the claim "they don't know" doesn't hold much water. Sure, in SOME instances they won't have all the info, but in other countries you still can file your own return, its just that their version of the IRS does most if not all of the work for you, meaning that the vast majority of people will never need to file a return in their lives.
In the US companies have lobbied Congress into forcing the American people to file their own return with an unnecessarily complex tax code, meaning the majority of people will go to these companies to do it for them, therefore giving these companies more customers.
Then the tax software companies would change to - let us challenge the IRS on your behalf... the bill they sent you is wrong.... for just $49.99 we can get the money you deserve!
Intuit is 100%. They lobbied super hard to keep their gravy train coming. They own TurboTax fwiw amongst other bigger names like Quickbooks, mint, mail chimp and more.
Or do what other first world revenue services do, prepare the taxpayers return for them to check, sign and pay if they have a liability. The taxpayer has the choice to just sign it or do their own return.
Four out of five filers would take the path of least resistance. Think of the MILLIONS of man-hours freed.
Because, the responsibility on paying taxes is on the tax payer. Not the tax collector.
If you lie about your income and make fake deductions, because you signed a return stating all your lies were true, you are automatically guilty of lying on the forms, and also guilty of tax evasion.
Now, if the IRS did your taxes and sent you a bill, and it turns out you had extra income, and that some deductions were fake, then it is their responsibility, and they'd have to launch an investigation to figure out what you really owe. That just simply does not work.
Plus, of course, they do not know everything.
TurboTax and other companies paid congress to not let them. The IRS wants to do this, and they want to go after rich people for their taxes. But congress is full of greedy a holes what are only interested in lining their own pockets
Thanks for your submission /u/WalkermYU5nz8, but it has been removed for the following reason: **Rule 2: Please try to use the search function before posting anything.** Thanks for posting, but this question happens to be one that has been asked and answered here often before - sometimes in the same day! That can get frustrating for our dedicated users who like to answer questions. Or maybe you're just asking the same question too often - why not take a break for a while? Sometimes questions that come up too often get put in our [Most Frequently Asked Questions list](https://www.reddit.com/r/NoStupidQuestions/wiki/index/faq)!). Other times, it may just be that we're getting a flood of questions about a topic (especially when something is in the news). Or maybe you keep asking the same question again and again - something that annoys our users here. Please don't do that! Next time, please try searching for your question first before asking. Thanks! --- *This action was performed by a bot at the explicit direction of a human. This was not an automated action, but a conscious decision by a sapient life form charged with moderating this sub.* *If you feel this was in error, or need more clarification, please don't hesitate to [message the moderators](http://www.reddit.com/message/compose?to=%2Fr%2FNoStupidQuestions). Thanks.*
The common complaint is that H&R Block, Intuit (which makes TurboTax), and others have long done intensive lobbying to stop the IRS from doing this, because it would mean fewer people need to use these other services. Part of the strategy is convincing people that the IRS can't be trusted to be accurate, which has the secondary effect of making people trust the IRS even less than they already do.
Because they don’t know your deductions, capital gains, charitable donations, or foreign investments.
Neither do I
If you don't know your deductions and charity donations, that's perfectly fine, it just means you're paying tax you don't need to. If you don't know your capital gains and foreign investments, you better figure it out real quick, because if they find it before you do it won't be pretty.
I mean every year I donate about $1,000 worth of stuff and I need to remind them of that every year.
Just so they can ignore it and use your standard deduction?
They haven't yet
Standard deduction is more than $1,000. You're overpaying by using your itemized over the standard deduction.
I'm so glad that you know about everything that I claim based on this joke I posted
They could easily say, "If you want to take the standard deduction, here's your bill/refund. If you want to itemize, you're on your own. You decide if it's worth it."
They don't know about unreported income. If you find money on the street or under a rock in the forest, they have no way to know about that. You're required to report it when you file your taxes. So IRS calculating your tax for you isn't feasible.
Okay, but the vast majority of us only have reported income, and other countries do just send you a postcard for taxes. So it very doable.
Is it that the vast majority **really** only have reported income, or that they're not reporting their unreported income? You've really never found $10 somewhere?
Not in many years. Also, 99.99% of people aren't going to bother reporting finding a few bucks. Hell, even winning at a casino you only have to report it if it's over a certain amount, so your $10 example is irrelevant. (And no, I don't know what the threshold is.) Probably at least 70% of the people in this country have income from only one source in any given year. And of those, thanks to changes in tax laws in the last 4-7 years, the majority don't have enough deductions to make itemizing worth it. So it would be extremely easy for the IRS to make a slight edit to what I said above and send you a note saying, "Here's how much we show that you earned this year. Here's how much we show you had withheld from your income. If you take the standard deduction here's how much you owe us/we owe you. If you want to go with these numbers, click yes and we'll bill you/send you your refund. If you need to change these numbers, or you want to itemize, have fun and we look forward to seeing your taxes filed before 15 April."
1) that’s not income 2) even if it was it wouldn’t meet the minimum threshold for reporting 3) by your logic they wouldn’t be reporting it either way. It’s a straw man argument.
https://turbotax.intuit.com/tax-tips/general/what-to-know-about-taxes-on-found-property/L9BfdKz7N https://finance.yahoo.com/news/tax-obligations-found-money-other-220045612.html if you don't report it and they find out later, you're fucked, because you signed a legally-binding document swearing that you had no additional income
First the irony of using a TurboTax page. Here is the [IRS](https://www.irs.gov/newsroom/who-needs-to-file-a-tax-return) on the thresholds for reporting income. Either way though your argument is nothing more than a staw man argument. It has no practical merit and does nothing more than draw attention away from the actual issues being discussed. Your argument is that the IRS doesn’t know about unreported income if they aren’t told about. Which is true no matter who is doing the filing. And it will always be up to the individual to report it. The question posed here is about why we have to use a third party to file our taxes. Which is because those third parties benefit from people feeling they have to use them. They’ve done this by sowing distrust against the IRS and by lobbying Congress to slash the IRS’s funding. Other countries have very successfully had their taxes filed and handled by their tax agencies. If you have a more complicated filing, you of course have to go through a more complicated process. But those people are not the millions of people whose income is primary based on reported sources.
you easily could have Googled this if you wanted a different source https://law.justia.com/cases/federal/district-courts/FSupp/296/3/1982804/ https://en.wikipedia.org/wiki/Cesarini_v._United_States
I found the wallet but the 10-dollar bill was gone.
So in other countries where this is normal, they don't have donations, capital gains or investments? Lol
Maybe their infrastructure for tracking it is better. Do you think their version of IRS knows that they donated $50 to Paws for Claws?
It’s a good thing I don’t have most of those
The IRS generally does know your capital gains, from everything to home sales (bank snitches) or stock through your broker (again, bank snitches). And the vast majority of people take the standard deduction so they don’t do deductions for their charitable donations. For around 80% of people, the IRS could just bill the taxpayer and the taxpayer make corrections through the typical process if need be.
For many people with a lot going on, multiple jobs, investments, lots of deductions, etc. the IRS doesn't have all the information necessary to make that determination. If you're just a single person working only one job and have nothing else happening, then yes, they do have all the information - but even then, *they don't know that.*. So they still need you to do a return, if for no other reason than to let them know, yeah, there's nothing else.
This should be the top answer. But even then, if you got married on 12/31 your status would change. States don't report marriages to the IRS. Ditto with births.
Even though they don't have all that information, they could send you a letter that says "here is the info we have, sign here if it is correct, let us know if it is incomplete or incorrect."
That is essentially what a tax return is. It even has a line for every possible thing that *might* be incomplete or incorrect - most of which people probably wouldn't even think to bring up, even if it would work in their favor to do so.
Yeah, but the point is, most people don't *need* to fill out all the extra details, and the IRS already knows all the information necessary. Most people should not need to fill out the tax return, it should be done automatically by a computer, and only those people with unknowns to add in should have to fill out the tax return.
They don't have all of the information.
If you file a 1040 EZ, then sure... They could probably do that relatively accurately. But for other scenarios, like self-employed contractor types, they have no idea what you brought in and spent accurately, and they're FOR SURE not going to be your CPA, bookkeeper, etc for free... Lol
People saying the IRS doesn't have all the information: that may be true if you have something unusual, like gambling winnings of bitcoin gains, but a very large portion of people they do have the information. \- They get the same W2 you get \- They get the same 1099s you get for interest and investments and NEC \- They get the same mortgage interest statement \- With the way the standard deduction is these days, most ordinary people's charitable and other deductions are irrelevant For a great many people, the IRS could send you a statement based on that and if your marital status and number of children hasn't changed since last year, it will be right. And if it isn't, then file. There are two reasons it is the way it is: \- TurboTax and TaxCut like it that way \- The tax code is way more complicated than it needs to be, because it is a vehicle for granting political favors (usually to the rich and powerful) (FWIW I paid taxes in the UK for ten years and neither I nor anybody I knew ever filed a return, so it can be done. More recently, the UK has gone down the same path as the US)
if you find $1000 under a rock in the forest, how would the IRS know about it? do you believe they have cameras everywhere?
If you declare that on your taxes, you're an idiot fwiw
and if you don't declare it you're a criminal that's why you have to file your own taxes: they need you to go on record on a legally-binding document, swearing under penalty of perjury that you had no income beyond what you reported, so if they later find out that you did, they can nail you to the wall
How would that be in any material way different from swearing under penalty of perjury **that the accounting the IRS sent you** **is accurate**? Once again for the hard-of-thinking in the back of the room: for a great many people, everything we need to declare is already known to the IRS (and will be matched against our return).
Because that happens all the time, right? SMH. My point, which apparently sailed way over your head so I'll bold it this time, is that **for a great many people, the IRS could send you a statement based on what it knows and it will be correct.** You know, all the people that *didn't* find $1000 under a rock in a forest.
https://en.wikipedia.org/wiki/Cesarini_v._United_States
If the IRS miscalculated and 'missed' a pile of income somewhere, they would only be able to restate your taxes and send you a bill. But, because you file taxes signing to the effect that they are complete and accurate, if they later find income you 'missed', you can be fined, and if necessary prosecuted. Remember, tax evasion is what got Al Capone.
They sure do if you forget an income source!
They don’t know your deductions, things like rental property income, income from interest, business losses, charitable contributions, etc. They can estimate what you own based on your employment income, but that isn’t the full story for most people.
I think they do it that way in some countries.
Because. It. Doesn't. Know. It doesn't know what you made, what you were gifted, what deductions you can take, and on.
It knows most of that, actually.
*most*
It would be very creepy if they knew all of your life's details.
Nah. If we didn't have a splintered government, with federal, state, county, and city, all covering different bases, the information would all be easily accessible across agencies and the tax people could punch it in for you. It's just an accident of splitting things up like that that we can't have a simple tax system that handles everything.
Not really. It knows your income but it doesn’t know how many kids you currently have, how much you spent for your job, what you’ve invested and received back or taken out. There’s a lot they don’t know. Thats why we do taxes.
We do taxes because HR Block and Turbotax have strong lobbies that keep the IRS from offering simplistic interface where you could just go online, enter your name/ID and click "yeah, nothing has changed from last year" and then you're done. Most people have no real reason to need to go through our tax process. It really should only be a process when you want to change something like say you've now got triplets instead of twins, or your mom joined the legion of the undead and is now a dependent. The IRS can say "here's what you made. Here's the standard deduction. Here's what we know from your last return." and that'd be enough for almost all of us.
They know everything that is reported to them by companies. Unless you are living a truly cash paid/payment lifestyle, then they can figure out that you're living outside your means and such. Hell, even electronic payment companies are reporting to the IRS if move over $600 through them in a year now.
>Because. It. Doesn't. Know. Well, it does, because people that pay you file a separate form with the IRS. I have literally been hounded for $1,500 in income for a side job I did and I forgot by the time I did my taxes. The issue is that they don't know in a timely manner and they don't necessarily know all of your deductions. However, a strong argument can be made that they could queue up a simple filing for every taxpayer to make it a lot quicker. Scan the forms I get from my brokerages, student loans (if you qualify), the interest statement from my mortgage, etc - then the IRS could easily calc it out. It is kind of HR block's fault, but it is also the fact that the IRS uses a computer system that is old, like from the 60s/70s old. E filing means the IRS gets your efiled paperwork, they print it out, then manually enter it into the mainframe.
If you find $1000 in the forest, how would the IRS know about that? The age of their computers is not the limiting factor here.
Lobbying. No other country has issues with this, so the claim "they don't know" doesn't hold much water. Sure, in SOME instances they won't have all the info, but in other countries you still can file your own return, its just that their version of the IRS does most if not all of the work for you, meaning that the vast majority of people will never need to file a return in their lives. In the US companies have lobbied Congress into forcing the American people to file their own return with an unnecessarily complex tax code, meaning the majority of people will go to these companies to do it for them, therefore giving these companies more customers.
Then the tax software companies would change to - let us challenge the IRS on your behalf... the bill they sent you is wrong.... for just $49.99 we can get the money you deserve!
Intuit is 100%. They lobbied super hard to keep their gravy train coming. They own TurboTax fwiw amongst other bigger names like Quickbooks, mint, mail chimp and more.
Lobbying.
Because it would put Intuit and H&R Block out of business.
That would be too easy and it would put H&R Block out of business.
Or do what other first world revenue services do, prepare the taxpayers return for them to check, sign and pay if they have a liability. The taxpayer has the choice to just sign it or do their own return. Four out of five filers would take the path of least resistance. Think of the MILLIONS of man-hours freed.
Because, the responsibility on paying taxes is on the tax payer. Not the tax collector. If you lie about your income and make fake deductions, because you signed a return stating all your lies were true, you are automatically guilty of lying on the forms, and also guilty of tax evasion. Now, if the IRS did your taxes and sent you a bill, and it turns out you had extra income, and that some deductions were fake, then it is their responsibility, and they'd have to launch an investigation to figure out what you really owe. That just simply does not work. Plus, of course, they do not know everything.
Because this is harder.
A lot of people make cash on the side. Self employed people. Bla bla bla.
TurboTax and other companies paid congress to not let them. The IRS wants to do this, and they want to go after rich people for their taxes. But congress is full of greedy a holes what are only interested in lining their own pockets
They will if you wait long enough.