Coming IRS Crackdown?
The Schumer-Manchin compromise includes a massive increase in the tax collection budget.
The WSJ Editorial Board warns, “The IRS Is About to Go Beast Mode.”
Progressives want Joe Biden to unleash what they call “beast mode” executive power, and the Schumer-Manchin tax bill supplies the cash to turn the Internal Revenue Service into Wolverine.
The pact between Sen. Joe Manchin and Majority Leader Chuck Schumer includes $80 billion in new funding for the tax man. Democrats claim this “investment” will yield more than $200 billion in revenue. That estimate is highly speculative, but if it’s anywhere close to right IRS auditors will soon be coming after tens of millions of Americans.
Democrats have, rightly I believe, complained bitterly for years that Republicans have cut IRS investigative ability to the bone, making it next to impossible for it to go after well-heeled tax cheats. So, more enforcement seems like a good investment.
The $80 billion is more than six times the current annual IRS budget of $12.6 billion. The money will be ladled out over nine years and comes with few strings attached. The main Democratic command is for the tax agency to bring the hammer down on taxpayers.
The bill earmarks $45.6 billion for “enforcement,” including “litigation,” “criminal investigations,” “investigative technology,” “digital asset monitoring” and a new fleet of tax-collector cars. The result will be far more audits, civil suits and criminal referrals.
Comparing a nine-year outlay to a one-year budget is silly. Presuming the money is spread out evenly over the period, it’s another $8.89 billion a year. Still, that’s a 70.5% increase—all for enforcement-related activities. That’s huge.
Still, to the extent that people are committing large-scale tax fraud, we really should be going after them.
Here’s where it gets interesting, though:
The main targets will by necessity be the middle- and upper-middle class because that’s where the money is. The Joint Committee on Taxation, Congress’s official tax scorekeeper, says that from 78% to 90% of the money raised from under-reported income would likely come from those making less than $200,000 a year. Only 4% to 9% would come from those making more than $500,000.
The IRS knows the super-wealthy employ lawyers and accountants who make litigation time-consuming and risky. It also knows that Democrats would howl if the agency pursues fraud in the earned-income tax credit program, despite what the IRS has estimated are $18 billion in improper payments each year.
Now, this is just an assertion based on analysis, not an announced policy by the government. But the Joint Committee on Taxation isn’t some right-wing outfit. It’s a top-flight entity established almost a century ago that “operates with an experienced professional staff of Ph.D economists, attorneys, and accountants, who assist Members of the majority and minority parties in both houses of Congress on tax legislation.” It’s currently chaired by Senate Finance Committee chairman Ron Wyden.
And the analysis is quite plausible if a bit depressing. Even in “beast mode,” (or Wolverine mode, which is based on a different X-Man) the problem this new funding is designed to correct would remain. Namely, it’s almost more trouble than it’s worth to go after mega-millionaires and billionaires because they can hide their assets really effectively and can afford to spend years fighting the IRS while mere mortals have no choice but to settle when the mighty IRS is breathing down their neck.
A particular audit target will be “pass throughs” including Subchapter S businesses that file under the individual tax code. Democrats failed to raise the top individual tax rate, so unleashing IRS auditors is Plan B.
Many of these are small businesses that will settle with the IRS rather than fight and endure years of costly litigation. The IRS won only $1.7 billion of the $4 billion in disputed taxes and penalties in cases closed in U.S. tax court in fiscal 2019. But few taxpayers can afford to fight in court.
This is indeed a Catch-22. We usually apply terms like “the trial tax” or “the process is the punishment” to the criminal justice system but the basic principles apply in any kind of suit brought by the government. If the IRS claims I owe them an extra $1000, I’m writing them a check unless I can resolve it with a phone call.
Despite all this new money, Americans shouldn’t expect better IRS service. The agency in the 2022 filing season answered a mere 10% of its phone calls. The Taxpayer Advocate Service revealed in June that as of May 31 the IRS was still sitting on 21.3 million unprocessed paper tax returns, with millions of taxpayers “waiting six months or more to receive their refunds.” Yet the Schumer-Manchin bill devotes only $3.2 billion for “taxpayer services.”
While the S in IRS stands for “Service,” it’s ultimately a tax collection agency, not a customer service business. Further, it’s really not that bad. It got way behind during the pandemic and hasn’t caught up.
The bill does, however, provide $15 million to study a bad Elizabeth Warren idea. An IRS task force will have nine months to deliver a report on the feasibility of the IRS running its own “free direct efile tax return system.” America has a voluntary tax system that lets taxpayers determine their correct amount of tax before the IRS checks it.
Sen. Warren wants to create what would be a federal H&R Block that assesses tax liability for taxpayers. Taxpayers would presumably have to appeal if they disagree, and who knows how long that would take.
I’m old enough to remember when Republicans wanted a tax code so simple that most folks could file them on a postcard. Indeed, Ronald Reagan proposed a system would have allowed “most taxpayers to settle their accounts with the government simply by verifying the accuracy of a return prepared by the IRS.” Alas, a year-long study completed in 1988 showed that it simply wasn’t technically feasible.
Presumably, the advances in computing in the interim have changed the possibilities. Whether it should cost $15 million to figure that out is beyond my expertise. But, given that it amounts to a rounding error in the federal budget, I’d say it’s worth the investment.
All of this is likely to be made worse by what seems to be the increasing politicization of the tax agency. Lois Lerner notoriously targeted conservative nonprofits for special scrutiny in 2013. ProPublica, the left-leaning website, obtained and published the confidential tax information of private citizens in 2021—conveniently when Democrats were debating whether to impose a new wealth tax. The IRS has promised to investigate the illegal leak but has so far come up empty.
These are red herrings. I oppose the politicization of the IRS but there’s essentially no evidence that it’s a particularly widespread problem.
Yes, the IRS targeted Tea Party-affiliated groups, eventually settling a lawsuit over the matter. There was clearly both malfeasance and misfeasance on the part of then-IRS Commissioner Louis Lerner including the destruction of evidence. At the same time, the rationale for the scrutiny was perfectly reasonable: groups with “Tea Party,” “Patriot,” and related words in their organizational name were quite often filing as 501(c)3 and 501(c)4 non-profits when they were in fact activist organizations that didn’t qualify. Indeed, as Matt Bernius wrote here way back in 2013, “78 of those 96 BOLO applications were found, upon review, to contain ‘indicators of significant amounts of political campaign intervention.’ In other words, the names section of the BOLO list had an 81% success rate.” The optics were terrible and the management was hamhanded. But, no, the Obama administration wasn’t using the IRS to go after its enemies.
Slightly more alarming were the audits of Donald Trump foes James Comey and Andrew McCabe. It’s statistically probable that they didn’t happen by chance.
Regardless, there’s simply no reason to think that these resources are going to be targeted at foes of the administration. And, indeed, if we’re to believe that the investigations are going to be aimed almost exclusively at those making under $500,000 and small business owners, it’s hard to believe the administration would even know who they are.
The new wave of audits will hit taxpayers even as tax revenue as a share of GDP is back close to its historic norm of 18.5% and may be going higher as corporate and individual tax revenue soars. Tax receipts were up 25% in the first nine months of fiscal 2022 after rising 18.3% in fiscal 2021.
The federal government isn’t starving for revenue. Congress wants more tax revenue because it can’t control its appetite for spending. That’s why it wants a tax agency in beast mode.
This is a fallacy of distraction. Whether we’re spending too much money or collecting “enough” taxes are certainly debatable issues but they’re not the issues under debate here. Nor, even, is the tax code itself. The bottom line is that Congress has passed and the President has signed a system of taxation into law and, to the extent it’s constitutional (and only crackpots assert otherwise) then it’s the duty of citizens, corporations, and other entities subject to the code to comply. Indeed, I don’t think the WS Editorial Board disagrees with that.
So the questions, then, are about effectiveness, efficiency, and fairness.
Is this new infusion of investigative resources is going to significantly enhance the IRS’s ability to enforce compliance with the law? It would seem so. The Joint Committee on Taxation apparently estimates that the $80 billion expenditure will yield $200 billion in additional revenue, a net of $120 billion. The WSJ team questions that but presents no actual argument.
Is adding $120 billion to the Treasury over a nine-year span going to make much difference in our ability to meet our needs? Probably not. But, to the extent that people are intentionally cheating the system, unfairly free-riding on the rest of us, going after them seems not only fair in its own right but something that would enhance public confidence in the fairness of the system.
Is the stress created by the effort to squeeze out said $120 billion an undue burden on the citizenry? To me, that’s the strongest claim made by the editorial. And it’s simply not one I have sufficient information to assess.
Let’s dismiss the unsubstantiated insinuations that the investigations would be politically targeted. Is the IRS simply going to look harder at upper middle class filers, particularly those who derive their money from sole proprietorships and Subchapter S businesses, or is that just a surmise? And, if so, are these mostly intentional tax cheats or simply folks engaged in sloppy accounting practices? Hell if I know.
Which brings me to a point not raised by the editorial but occurs to me in assessing the last question: will this simply force taxpayers to shell out more money for lawyers and accountants to minimize the risk of audits? I suspect that it will and consider that a net negative. Whether it’s outweighed by the additional revenue collection and, especially, the sense that everyone is paying what they owe is, again, beyond my ability to assess.
It’s all about “tax enforcement”…
Hey, what’s this bright red dot on my chest?
In what world is it better for me to write a check to a private corporation for them to assess my tax liability, instead of having the government do it for free? I don’t have any more ability to dispute Block than I do the government.
I’ve been pretty appalled to learn of some pretty dubious notions of what is appropriate from friends/acquaintances. If these are even remotely indicative of the broader attitude towards taxation by the near-to and upper-middle class, the problem of under-reporting is probably pretty substantial.
I think there’s a pretty clear line between what is confusing, and what is cheating. A decently-staffed IRS would, I think, be a good thing.
From the WSJ
This is total BS. For most Americans, the IRS has everything they need to calculate your taxes and, in fact, they do, which is why you can get a bill or a credit months after filing your return. There is no reason for 90% of the population to have to work through the forms. Your payroll taxes are reported. Your non-retirement investment earnings and bank interest are reported. With a few additional pieces of information (anyone born this year? Anyone die? Did you buy or sell a house?) The IRS could total it up and send you a bill or a refund in minutes. There is no reason to pay HR Block or anyone else to do this for you. Faced with growing pressure to end this source of anxiety and annoyance for the vast majority of taxpayers, those companies agreed to a compromise a decade ago, wherein the IRS would hold off offering such a free service to taxpayers if the companies would offer a free service of their own for the simplest tax cases. But the companies acted in bad faith and it is almost impossible to use their software without accidentally clicking on one button or another that results in charges.
From James:
I remember this very differently. Groups applying for a charitable exemption are not supposed to engage in political activity. The IRS scrutinized groups whose names or affiliations indicated they were probably political. Having “Tea Party” in your name is a pretty darn good indication that you have falsely claimed to be apolitical. They also looked at similar Dem leaning monikers and snared a fair number but, no surprise, Republicans have been abusing this exemption for years at far higher rates than Democrats, so there were more cases involving Republicans.
And yes, the Trump administration wrung an apology from the IRS for Linchpins of Liberty. Take a look at their website. This is obviously a political group. Apology? These liars should have gone to jail for perjury.
Speaking as someone who works for an org that offers a free alternative to predatory tax filers, I can say that @MarkedMan is 100% correct. The key term here is “most” (or more accurately “the majority”).
[Edit: since I wrote this I did more research and conservative estimates put it at 41% to 48% of Americans. So “majority” and “most” are both inaccurate.]
For most lower to upper middle class and even lower “rich” Americans, the IRS is fully capable of calculating our taxes for us. The reason for this is (just about) all of our income and expense sources are already reporting to the IRS. It is a policy decision that shifts the administrative burden of filing taxes onto individuals. It’s a policy decision that is in part sustained by a rather large and powerful lobby.
Also the idea that the tax system in any form is “voluntary” is laughable on it’s face and should be a hat tip that the current structure of the system is set up to benefit the ultra rich who can afford not to volunteer all the necessary information thanks to loop holes.
So James, you are also 100% when you wrote:
We have long since advanced to the point where we can do this, thanks to computing, security, and networking advances.
There are some exceptions–primarily around emergent forms of assets like crypto where reporting is lagging. But it’s now catching up and that’s more of a novelity issue than a systemic failure.
Where the biggest problems are for those at and below the poverty line and typically those who are rich enough to have really complex financial holdings. With the latter group, the complexity comes from the different forms their income takes and also figuring out the impacts and interactions of the various social services programs they may or may not be receiving. And for the rich, the complexity of their holdings is hinted at in the above post.
There is absolutely no reason NOT to do this.
Does the WSJ editorial board generally lie this frequently and obviously? How am I supposed to take them seriously about the “fact” that the IRS will be targeting the middle class instead of the rich when they repeat multiply disproven lies like the vicious attack on the Tea Party? Why would anyone even bother to quote them?
Having a side job/self employment has been growing significantly in recent years. Somewhere between 30-45% of American adults have some kind of side gig.
I am self-employed, and in fact one of my “clients” is a PR firm that is completely staffed by people who are similarly defined as self-employed. I think that the assumption that 90% of people could have their taxes calculated (accurately) by the government is a bit generous.
Yes, all but one of my clients submits 1099’s to the government, but I have one that does not (based outside of the US).
@Jen:
While this is true, I suspect you are overestimating the number of Americans with side gigs that are as unique as your (i.e. an offshore client). The vast majority of “above the table” side gig work is being done through reporting organizations.
But you are
probablycorrect that 90% is too high.However, let’s say it’s only 85% or 80% of all taxpayers or even 70% that could have their taxes accurately calculated–there’s still no good argument NOT to auto-calculate.[Edit: Much, much too high. A conservative estimate puts it at ~41 to 48% of filers. Apologies – MB] Of course, there would have to be an option to submit your own calculation.Having screwed up my taxes thru a simple misreading and then spending a considerable amount of time paying back taxes, I have severe anxiety every tax season, to the point where I just plain and simply can’t do them. Oh the joy I felt the first time I took my taxes to an accountant and then a couple days later signed the forms and gave them the few bucks it cost me to have them done.
No muss, no fuss, and very few worries. Imagine how much more joyous I might feel if could get the IRS to do it for free? especially knowing that if a mistake is made, it’s on them? (I suspect I would owe back taxes but I doubt very much there would be penalties)
@Matt Bernius:
There are lots of self-employed people who don’t get 1099s. There are lots and lots of people who are selling stuff online (or in their front yard) and making very good coin doing so. There are millions of people who get tips. There are millions of people in the trades and service industries that have lots of deductions for mileage, tools, depreciation of job assets, etc. Homeowners with mortgage interest to deduct. Medical expenses to deduct. Ad nauseum.
Hell… I remember being a young man and walking into an H&R Block with a stack of over 20 W2s and a box full of receipts. As a stagehand, almost every gig I worked was a different job– because it’s paid by the promoter, not the venue or the union.
2020 was the first year in a very long time that I felt comfortable.
While I certainly support a free online option directly with the IRS, I think there are a lot more exceptions than you realize.
I am of a mind that the IRS should be expanded further to offer taxpayers actual, you know, help. Getting someone on the phone who can authoritatively answer questions would go a long way to lower the absurd amount of hate people seem to have against the IRS and put the “service” part back into the name. As it is getting an answer out of the IRS is at lottery levels of random chance.
I get frustrated with those who demagogue the IRS just to give cover to actual tax cheats. There should also be an elite section for those well-heeled tax cheats if for nothing else then a chilling effect on extrema nonsense.
@Matt Bernius:
I agree with the idea of auto-calculation wholeheartedly–and, I believe this is how it’s done in the UK?
(Also, I’m actually full-time self employed (not a ‘side’ gig), it probably would have been more accurate for me to note “gig work”–both full-time and side hustles.)
@Rick DeMent:
Yep! When I started working for myself, we immediately engaged an accountant to do our taxes. There was NO way I was going to try and figure out all of the self-employment schedules, etc., especially knowing that there was no one to call if I had questions. The money we spend on the accountant is BY FAR worth it. We pay him less than $300 to do our taxes.
Few things erode the rule of law more than having prominent groups or individuals to whom the law does not apply. Therefore it is a major mistake for the IRS to skip the richest people merely because it’s too hard to go after them.
Having said that, let’s not overlook a Catch-22 type situation. Another thing that erodes the rule of law is having the law enforced by an ineffective agency. If the IRS goes after the Elons and produces few results, that’s almost as bad.
So find the proverbial happy medium: score a major victory against a few rich tax evaders, but focus more of the efforts lower down where victories are more likely.
Mea Culpa Jen and others. I got my reports totally mixed-up and should have researched before I posted. I’ve seen higher numbers from think tank reports, but the last estimate from one of the federal reserves was ~41% to 48% of Americans could have their taxes automatically calculated. My sense is that’s a conservative number, but regardless it’s way lower than what I stated above.
https://www.nber.org/digest-202207/could-irs-prepopulate-income-tax-returns
I would still argue that this is the right approach, but, definitely a smaller impact than what I claimed above. Apologies.
[Edit: This is one of the reports that got jumbled up in my ADHD brain: An estimated 70% of taxpayers could get free tax prep, but far fewer do. — https://www.marketwatch.com/story/an-estimated-70-of-taxpayers-could-file-their-taxes-for-free-but-far-fewer-do-heres-why-11649198684
My idea for fighting tax evasion: a national escheat law that all abandoned property is to be held in trust by the federal government until the rightful owners are identified. So if there’s some asset without an obvious owner, it would be put in that trust until the owner comes forward to identify themselves.
Now you don’t have to waste tons of effort and expense breaking through complicated corporate shields to find hidden assets, the owners have to provide you a roadmap in order to get their stuff back.
@Matt Bernius: Dreading doing your taxes? Other countries show us there’s another way
I am sure that gig work in Japan and the Netherlands has just as many foreign employers as in the US and they somehow get by. The difference is that the government gives you the numbers and you can check for accuracy. Rather than the other way around.
@BugManDan:
I’m betting the tax laws in Japan and Netherlands are far simpler than those in the US. In China, I never filled out a form at all. My employer deducted a set amount from my pay and it went to the tax agency.
@Han: Government computing your taxes, with you providing any additional DOCUMENTATION you wish to provide is common in Korea. Worked great. Certainly if a country that makes knock off PPE to sell through Amazon can compute people’s taxes through a government agency, the US will certainly do it better.
@MarkedMan: “anyone born this year?”
Unless you paid cash to a rural midwife for maternity services, the costs will show up in your bank statements (and if you DID, you probably don’t owe any taxes anyway, just sayin’).
@Mu Yixiao: That is probably true. But the complications are mostly in the deductions. So it seems that they could easily do the EZ form for you, and some of the more common deductions (house payments, child credits, etc.). They have that info.
If you need to take other deductions or declare other info, that could fairly easily be accommodated.
@Matt Bernius: While the lower estimate is true for the simplest forms of filing, even in that case you would have to answer certain questions every year, such as new dependents, or change in filing status, etc. My 90% comes from an assumption that the questions would be a bit more thorough. For instance you might get a questions like, “Here is a list of reported incomes from all sources. Are they all correct? Are there any additional sources?” That would catch Jen’s case. And I also assume there would be a list of questions similar to the ones in the Intuit software, about having farm losses and stuff, to cover all the special exemptions.
Bottom line, the IRS software would resemble the Intuit stuff without all the places where you copy information from all the forms you got, because it would pre-fill everything that had been reported, and it would give you a chance to add anything that was missed. This is not trivial. Just picking one example, tracking down mortgage interest payments every year was a moderate pain in the ass, with different lenders presenting different forms or having it accessed in obscure corners of their websites. But I’m pretty sure they report that directly to the IRS too. (If not, they should). Another example: between my wife and I we must get 20-25 forms a year for various investments and accounts. Every company’s forms are different and they come in from January to April. Keeping track of them and finding what is relevant and what isn’t, then finding the form to enter them, well, that’s why we use an accountant. But the IRS already knows all this! They could simply show it to us and ask if it is correct.
While Matt Bernius falls on his sword, I think the many, many examples of foreign nations managing this highlight that the real problem is the system itself. Kind of like American healthcare, where ideology has stopped us from figuring out what pretty much every other developed nation has. Or our legal system-where being rich makes it much easier to evade conviction because of the army of lawyers you can employ to find loopholes and generate doubt. Combine those two ideologies/systems and you have our tax code. If we could take our special-interest and rich (WSJ supported) blinders off, the tax code could be made much simpler, and it would be possible for 90% or more of filers to have their taxes calculated automatically.
I’m not holding my breath.
@MarkedMan:
Completely agree on all points. There is the possibility of a hybrid solution that would do most of the administrative work for the filer without being the full “mail you a postcard.”
There are accessibility or equity issues when it comes to going with an online first method. But this would still be a huge improvement. And definitely would fall under the “S”–i.e. Service Delivery–part of the IRS (to @Rick DeMent’s point).
@MarkedMan:
TurboTax integrates with ADP (the payroll people)–which my company uses. All of my information from last year is auto-filled, my payroll information is auto-filled. All I have to do is put in my mortgage information. (In past years, I had two jobs and unemployment while on 50% furlough for COVID lockdown, so there was a little more to input).
I e-filed last year and it took about 1-2 weeks to get my refunds (state came quicker than federal).
@BugManDan: “And I said to my friend Togo, you know, in America, people spend hours, days filling out these forms. And he said to me, why would anybody want to do that?”
It’s not that anybody wants to do that, it’s that there’s a huge industry of tax preparers, and they are prepared to spend huge amounts of money to buy off congress to make sure nothing that would actually help people passes. Check out how much legal bribe money Turbotax has paid in the last couple of decades to make sure they continue to be needed…
@Mu Yixiao: “TurboTax integrates with ADP (the payroll people)–which my company uses. All of my information from last year is auto-filled, my payroll information is auto-filled.”
Yup, and TurboTax takes a handy chunk of change for this service, which could be provided for free by the government… which is why TurboTax employs an army of lobbyists to fight this concept.
@MarkedMan: Last year, for the first time ever, I used a computerized income tax calculating program (I think I used Tax Act because it was listed on the IRS website). I had hoped it would save some time, but mostly I did it because I’ve gotten tired of the ongoing minor audits that happen every year because I have capital gains and other assets that are taxed at non-standard rates, so my return is always incorrect. Still, it took as long to type information into boxes as it does to fill out the forms myself.
One thing I still don’t do is file electronically. I print the forms and mail them in. I take de gubmint at their word on the “most people whose returns have been phished file electronically” factoid. It may be the only instance where I take de gubmint’s word on anything, tho.
@mattbernius: While I was in Korea, the government never “mail[ed] me a postcard” for any information. The always sent a text message to my phone.
The post office isn’t reliable for sending timely messages. 😉
@wr:
I think it costs me $40 or $50 to file both state and federal. It’s not that much.
No it wouldn’t. It would be paid for with more taxes. TANSTAAFL
Speaking of taxes…
Winner Of $1.28 Billion Lottery Gets $433.7 Million After Tax
@Just Another Ex-Republican:
He’s also flaunting his editing superpowers!
@Matt Bernius:..An estimated 70% of taxpayers could get free tax prep, but far fewer do.
By the time I retired from the landline telephone industry I had worked most of my jobs as a contractor, not a telephone company employee. Either I was self employed or the employee of a communications contracting company. I always had to supply my own truck and tools on the job. I traveled a lot. In 35 years I worked in 14 states. Depending on the job sometimes I was a waged employee paid by the hour other times I was paid by my production. Sometimes I was paid a lease for my truck and tools. Sometimes I was paid an hourly wage and a per diem to cover my travel expenses. Other jobs I paid all my costs out of my gross pay. Sometimes taxes were withheld other times they were not. Of the 14 states I worked only two, Texas and Florida did not have a state income tax. I always figured that if I could read and write and add and subtract I could do my own taxes. One year I had some outfit do my taxes just to save the time it took. I ended up having to tell them what forms to file for some expense or something and I still had to pay them. Screw that. I can’t remember the titles of all the federal tax forms and schedules I filed in any given year. It was a stack. Many years I filed federal tax and multiple state filings. Non-resident, part year resident, temporary resident. Each state was different. Every juristiction wanted copies of the taxes filed in the other state(s) and the federal 1040. If I remember Indiana and Illinois had some reciprocal agreement that if the tax filer worked in Indiana, for instance, and was an Illinois resident and the employer was based in Illinois the employee did not have to file Indiana income tax. The tax was more in Illinois. However the employee was eligible to draw Unemployment Benefits from Illinois that paid more than Indiana.
This was all well before electronic filing.
With all this tax madness several years after I retired I finally signed up to work for one of the major Tax Preparers. Not Blockhead. The other one.
This was 10 years ago. People paid as much as $200 to get a $2000 refund on income based on one W-2 form. When I worked at the Walmart kiosk and the boss wasn’t around* I told customers to go home and log on to the IRS website and see if they qualified for free or low cost filing. If that didn’t work out I told them to come back and we would be glad to take their money.
That was the only year I worked as a professional Tax Preparer.
*I was the only one there many Sundays in the middle of tax season when business was slow. One of the perks was that I was able to log on to the internet and see several NCAA Basketball Tournament games while I was getting paid. No sound for some reason.
@Mu Yixiao:
In general, it’s true there is no such thing as a free lunch. But I would be willing to bet that once the IRS got this up and running the savings in having a consistent method of filing returns and fewer mistakes would net out in our favor.
@Mu Yixiao: poor little snowflake. Has to struggle along on only 700 times my net worth. I don’t know why ANYONE plays the lottery given the government theft that goes with it.
@Mu Yixiao:
No. From your link.
They didn’t win $1.28b. They won a choice between receiving $1.28b segmented into 30 payments over 29 years or $747.2m now.
Once again, no.
@Just nutha ignint cracker:
Calculating the tax is easy. Figuring out the type for each of the different income streams, so I know which rate tables to use, is sometimes much harder. My mom died a couple of years ago. Some of the assets I inherited were simple income. Some were short-term capital gains. Some were long-term capital gains. Some were insurance payouts that weren’t taxable. Some were IRA withdrawals.
@Mu Yixiao: Kinda misleading headline. But “Winner of 1.3B lottery that pays out over 20 years elects to take it in a lump sum of 750M, and then 24% of that was withheld by the federal government yielding a $568M but if the recipient doesn’t do anything else to reduce his tax burden he wouldn’t get any of that back and plus could end up being liable for 37% on the whole thing yielding $434M”, wouldn’t really sell the myth they are trying to sell with their original headline.
@Mu Yixiao: “I think it costs me $40 or $50 to file both state and federal. It’s not that much.”
Sure. Multiply that by a few dozen million and you can figure out how much the company is raking in.
@Mu Yixiao: “No it wouldn’t. It would be paid for with more taxes. TANSTAAFL”
There’s just no sucker like a committed libertarian. Of course it’s cheaper to have this service done by a for-profit company than by the IRS. Because FREEDOM!!!
It’s like you’re desperate to have your pockets picked as long as it’s being done by a CEO who’s taking home tens of millions.
@Kurtz: I had decided to pass on showing the disingenuousness that normally goes with that type of post and just go for the snark, so thank you for showing the whole story to the lurkers. [thumbs up emoji]
@Michael Cain: You clearly are better at math than I am. And more aware of how the various tables work than I am, too. My total income is small enough that it’s simply too much work to try to control all the variables (I think I paid about $2k in income taxes last year). If whatever program I use gets the total correct, I’ll be happy.
One year all my income outside of interest and dividends was earned abroad. A US citizen abroad working for a local company. Iceland had already taken their cut.
After reading incredibly obtuse confounding text for several hours I gave up and hired an accountant for the US bit of the equation. Iceland’s version was a hell of a lot smoother. They didn’t send me a bill, they sent me a form describing how they had already taxed me. I basically didn’t have to do shit – they did it for me.