Filing Personal Income Taxes Shouldn’t Be Hard
The IRS has finally created a website to allow some people to do it for free.
WaPo’s Shira Ovide declares, “Surprise! The federal government made a website that doesn’t stink.” She is, alas, an easy grader.
Government websites have a mostly deserved reputation for being terrible and driving us nuts.
So it was a pleasant surprise to try IRS Direct File, a new (and politically controversial) option to file a tax return online directly with the Internal Revenue Service. Direct File works like TurboTax, but it’s run by the government and free to file a federal tax return.
Most people aren’t eligible to file their taxes with Direct File. I thought I could, was rejected partway through and instead used TurboTax.
Direct File was not perfect. Still, I liked using the IRS website — and I definitely prefer it over TurboTax, which annoys me with constant nags for more money and my private data.
So, while she definitely prefers the IRS website to TurboTax, she was forced to use the latter because the former rejected her halfway through the process. Alrightee then!
The first thing to know about Direct File is that it’s a trial project. And you probably can’t use it.
That’s exactly what I’m looking for in a government website!
Just going through Direct File’s seven online screens of eligibility checklists and doing an online identity verification almost made me quit.
Another sign of a non-sucky website!
But once I did start my tax return, Direct File felt pleasantly similar to TurboTax, which I have used for years.
This would be the site that she definitely does not prefer.
Direct File guides you through yes or no questions about your income and potential tax breaks. You can chat online for help, too.
There are far fewer questions than there are in TurboTax because Direct File only permits use by people who have simple tax returns.
Which is to say, the people for whom filing was already ridiculously easy?
There were things I didn’t like. Unlike TurboTax, which had a digital copy of my W-2 tax form and let me pull in digital records from my investment accounts, I had to type into Direct File details like my income and interest payments.
That took more time and left room for me to mistype numbers.
So, let me get this straight. This IRS, which is the government agency that should definitely have my W-2, does not allow me to access my W-2 on this website, which both doesn’t suck but won’t allow me to use it? And TurboTax, a private company whose software is decidedly less preferable to the aforementioned non-sucky government website, does? Got it.
The biggest problem was that part way through, Direct File told me that I couldn’t actually file my federal tax return with the site. Ugh.
Ugh, indeed! Why, I would say that this sucks.
I missed a detail in the eligibility checklist that you can’t use Direct File if you had more than $1,500 in interest income last year. I did. I was also nixed because I paid into a Health Savings Account, a fund through my employer to help pay for medical expenses.
So, on the one hand, I guess that Ovide could have figured that out by reading the checklist. But, then again, you’d think a non-sucky website run by the people in charge of the tax code would run you through the checklist right at the beginning of the process.
I went through the whole Direct File process anyway to see how it went. And again, I was pleasantly surprised that the website was easy to use with clear questions and helpful explanations. And did I mention that it’s free? (If you can use it.)
You get what you don’t pay for, it would seem.
You can also set up an account on the IRS Free File Fillable Forms website. Unlike Direct File or TurboTax, you need to go through the tax form yourself line by line. (Read more here about free or low-cost tax filing options.)
Oh, for fuck’s sake.
A colleague, Monica Rodman, found it confusing to use Free File Fillable Forms. Monica was so unsure of the results that they double checked the work with TurboTax. The whole process took 12 hours!
Monica gave up and had a good experience using Free Tax USA — which charged nothing to file a federal return and $15 for a state return.
So, Rodman has a BA from the Unnversity of Southern California with a 3.5 GPA and has been presumably filing taxes for a decade. She has a pretty simple tax situation, or else she wouldn’t be eligible for the pilot program. And she found it so confusing that she went ahead and used TurboTax, anyway? And it took her 12 hours to do all this?
I don’t know what it would take for a website to suck in Ovide’s world.
Because I have a business (this here website), part ownership of a farm (long story), and various other complications, I’ve been using an accountant to file my taxes for 15 years or more. It’s more expensive than it ought to be, but my taxes are more complicated than most. But folks who simply have a salary, a home mortgage, retirement accounts, health savings accounts—all encouraged by the tax code!—and the like really should be able to file cheaply and quickly.
Indeed, the IRS should simply fill out the tax forms for these people—they have the W-2s, 1099s, and such, after all—and allow people to review and acknowledge or go through the trouble of building their own return. That, in my estimation, would be a government website that didn’t suck.
“IRS, which is the government agency that should definitely have my W-2”
Why do you think they should have it? It’s created by your employer (or, more likely, your employer’s payroll company). The IRS gains access to it once you submit it via your taxes.
“So, Rodman has a BA from the Unnversity of Southern California with a 3.5 GPA and has been presumably filing taxes for a decade. She has a pretty simple tax situation, or else she wouldn’t be eligible for the pilot program. And she found it so confusing that she went ahead and used TurboTax, anyway? And it took her 12 hours to do all this?”
No. Rodman used a different website where you manually fill in your forms line-by-line, just on the computer. THAT she found confusing.
Wake up on the wrong side of the bed or something?
The folks who generate W-2s, 1099s, and the like for filers send them to the IRS as well. They’re required to by law.
The tax preparation industry is a $30 billion/ year business and they have funneled a lot if money into lobbying for laws that ban the IRS from making the process easier and more automatic.
So to answer your question, the site sucks because very powerful people’s fortunes depend on it sucking.
@Stormy Dragon:
This. James, this is yet another case of Republicans and some Democrats (but mostly Republicans) deliberately hobbling an agency, pretending it didn’t happen and then railing against the gubmint (IRS in this case).
What would the term be for a platform that is enshittified from the start? Do we merely call it “shitty”? That’s unsatisfying.
And if the platform got better with increasing use over time, would that be deshittified?
I suppose if I had to pick between enshittification and deshittification, I would choose the latter. But I don’t trust my intuition on this.
I would like to think that my preference depends on the ultimate level of shittified. Such that I would prefer enshittification if the end result is lower shittification than the alternative (ie, start with “shitty” and become deshittified over time).
But humans are more attuned to change than we appreciate. And we are terrible emotional forecasters. So I guess I’ll keep paying an accountant because it’s worth it (time and peace of mind). And inertia.
@Kazzy:..
I am looking at a 1099-R Copy B from the fund that distributes my pension.
It states: This information is being furnished to the IRS.
I believe all the W-2 forms that I received over the years stated the same.
@James Joyner:..
Farmer James, who knew? eieio!
@Stormy Dragon:
And by doing this, they can also mystify the process for ordinary people and turn into something extremely difficult and anxiety-inducing. Which then makes it easier to sell upper-class/corporate problems with taxes to a mass of people who believe their situation is analogous.
@Mister Bluster: I stand corrected, here and above. That said, I still think it makes sense to enter in the information. Common names, multiple employers, multiple banks, and other factors all contribute to the potential that the IRS doesn’t associate the correct W2 with the correct return in the correct way. There is also the potential that the filer is submitting before all those W2s and whatnot are process by an agency that has been intentionally underfunded and understaffed.
Ummm… I think that the problems you’re referring to above are what Social Security Administration numbers are about. Granted, the system isn’t perfect, but it works remarkably well.
Still, though I got used to my school’s payroll department filing my taxes for me while I lived in Korea and marveled at the convenience of their filing system, I will agree that being in control of the information yourself has its advantages, too. In the real world, I’ve started using a tax filing firm to do my 1040 because I’ve become fatigued with the yearly “Adjustment to payment” notices that the irregularity of returns from my small investment pool create on a year-to-year basis. The filing firm has a better grip on the rules than the instructions from the IRS can provide for me.
As someone who works in Civic Tech, I’ll approach this from the opposite direction. I think this is a HUGE step forward on many counts and it provides a starting point that even a few years ago didn’t seem possible
My org, Code for America, has been offering a service like this–getYouRefund.com–for a while. We also were encouraging the IRS to create a service like this one. So we were really excited when they announced this platform last May.
To @Stormy Dragon’s point there are a lot of factors aligned against this effort. Everything I’ve heard about the IRS tech team suggests they are really trying to make a great product on a rushed schedule. I suspect that the schedule and expectations about what data the site should have access to didn’t make things easy for them.
Yes, the entire W2 thing is super frustrating and demonstrates the degree to which different government systems don’t talk to each other. On the plus side, the IRS’s platform does have some really cool features including the ability to transfer a lot of what you enter to some State filling systems (including our platform).
Perhaps it’s Pollyanna of me, but from a Civic Technology perspective (and a government delivering useful services to it’s citizens and residents) this is a big step forward (especially on the schedule they set out for themselves) and I expect it to be significantly better next year.*
* – provided that it isn’t killed due to a change in executive administrations. Though chances are, even if Trump wins the election, it will still be available for next year. It’s the year after that which is the real question. All that said, during the first Trump administration, they killed a lot of really cool tech and infrastructure projects off pretty quickly.
@Kazzy:
Hell hath no fury like a 1st worlder facing a minor inconvenience. Whiniest, softest, crybabyiest generations ever. Waaaa waaaa waaaa waaaa.
Modern Americans have in easy reach endless luxuries that would amaze our ancestors just a few generations back, many of whom led short, brutal lives and most of whom had to endure sunup to sundown sweat and toil just meet basic needs. But for some odd reason, we have worked ourselves into the delusion that the obligations of peace and prosperity are supposed to be quick and easy.
Welcome to adulthood, patience and persistence required.
@Just nutha ignint cracker:
Correct. Yet government agencies are still a bit shy about using that as a look-up largely due to very understandable privacy concerns. You don’t want to create an app that essentially turns into an identity theft portal if you have access to someone’s social security number (and most of us above a certain age definitely have had our stolen at least once and circulated on “the dark web”).
We pay an accounting firm to do our taxes. It is the best $350 we spend every year.
I would LOVE to have a simpler system, akin to the European ones. “According to our records, you made $X, so your taxes are $Y.” But as others above have noted, the system in the US is complicated by design backed by huge industries that make money by keeping it so. We are never, ever, ever going to get to fix it.
@MarkedMan: @DK: This isn’t “railing against the IRS” or lament about having to pay taxes but rather a response to a review that says one thing but demonstrates another.
The tax code is needlessly complicated and filing is way harder than it is in other advanced countries. But that’s mostly a function of Congress using the tax system as a back door social engineering program and, yes, the lobbying by various rent-seekers referenced by other commenters.
There’s no real way for businesses taxes to be easy, since it requires accounting for revenues and expenses. Unless we move away from taxing income at all and going to some sort of value-added or other consumption based tax.
Thanks for the laugh this morning, James, the mockery of Ovide trying to shine that turd was funny.
More seriously, an IRS system is long overdue. Whether the IRS can actually make a system that works and that is user-friendly for the target audience is another matter. My frustration with the usual partisan sniping about the “size” of government (ie. spending) is that no one cares much about the effectiveness. So, while I hope this trial program actually becomes workable, I’m skeptical because of the experience of so many failed programs in the past or programs that finally only started working after enough money and time were thrown at it.
The other issue is our overly complicated tax system. A big reason most other governments can offer easy ways to pay is that their tax systems are much simpler. They don’t have the complicated mess of deductions, credits (refundable and non-refundable), exemptions (two different systems), “tax expenditures,” and multiple business filing statuses for individuals with business income.
Like more government effectiveness and efficiency, tax simplification is something neither party supports beyond occasional lip service.
Of course, as Stromy mentions, there is the lobbying. This goes hand in hand with a complicated tax system. The tax preparation industry doesn’t want a simpler tax system for obvious reasons, and they don’t want a “public option” for tax filing for the same reasons. Unfortunately, lobbying is a reality and difficult to counter.
If I were King for a day, I would remake the entire tax system, but that’s a fantasy. So I’m happy to settle for incremental change toward greater government effectiveness so we get more for our tax dollar, so trials like this can actually be successful, greater application of the KISS principle in our tax system, and support for most other efforts that reduce the compliance costs of paying taxes.
I worked in at least 14 states over 35 years. In addition to federal income tax that I have filed in the past on wages and on income derived from self employment and being partner in a business, I filed State Income tax in 11 states. FL, TN, TX being the no state personal income tax exceptions.
Some years I worked in as many as 4 states that taxed personal income. Aside from multiple federal forms no two states were alike in how part time resident/non-resident filing status was determined.
This was all before internet. Everything was filed on paper tax forms through the US Mail.
I filed them all by myself. I figured that if I could read and write and add and subtract that I could file taxes. In all that time only once did I hear from the Federal IRS. The letter I received never used the word audit. The letter did claim that I had not reported income from some source or other.
I knew that I had. I made a copy of the form that I had filed showing the amount reported and circled it in red and sent it back to them. I never heard from the IRS on that matter again.
One year in the early ’80s I thought I’d try out H&R Blockhead just to see if it was worth it to pay them and save me the time of tax preparation. I ended up having to tell them all about Employees Business Expense when they asked me why I gave them records of all my motel charges and on the job milage and other expenses that I incurred working as a traveler and using my personal vehicle on the job.
Eleven years ago I decided to work for Jackson Hewitt preparing state and federal tax returns for customers. I realize that it costs JH a chunk of change to keep up their files with all the federal and state tax laws involved. I did not like charging customers $200 so they could get a refund of $800 or so. When I worked the Walmart JH site if I was the only one there I would tell prospective customers to go home and check out the IRS.gov website where they might file for low or no cost. I was bad for business. I told them if that didn’t work out to come back and we would be glad to take their money.
I never worked as a professional tax preparer again.
@James Joyner:
I get that (and assume that MarkedMan and DK do too), but your tone in writing these little screeches is sooooooo petulant and offended-sounding that it’s easy to see how someone could mistake them for being something other than “a response to a review…”
@Just nutha ignint cracker: I’m mostly bemused by it all. As noted in the OP and the comment to which you were responding, I use a professional preparer at not insignificant expense because my personal tax situation is complicated and I see no obvious way for it not to be. But I do think 85% (give or take) of taxpayers ought to be able to file the equivalent of the old 1040-EZ quickly and for free on the IRS website.
@Just nutha ignint cracker:
I’ve been debating online since the BBS days of the mid-1980’s, and one thing that never changes is that many subtleties of communication are difficult to convey with the written word. I took James’s post as humorous bemusement, but on a second look after reading your comment, I can definitely see how it could come off differently.
Trina does my taxes. You just need a Trina.
@Andy: Andy, you’re a smart guy. So where do you get this boilerplate nonsense?
People who believe that government has a role to play care a great deal about the effectiveness of government and spend countless hours on it. Libertarians/Republicans who have a vested interest in government failure, and who in any case have no comprehension about what good government means, are the ones who don’t care about effectiveness. No, worse, they seek to make government fail, so as to advance their perceived causes.
@Andy: It seems Dr. Joyner’s tone is being very misunderstood around here lately. The things a blogger must endure from his audience. Tough crowd.
That’s what the Australian MyTax app does, as long as the taxpayer provides their tax file number to institutions like banks and superannuation funds. Log on to the Tax Office website, download your draft return, review the information, complete any missing sections like donations to charities, and click on submit. The refund is usually in your nominated bank account within three weeks (or you get a bill).
As a work-from-home academic with multiple employers, I had to submit claims for quite large work-related expenses, which took some time to calculate. But the app has worksheets to calculate depreciation, pop-up FAQs to advise current rates for claiming things like car mileage and home office expenses, and other helpful tools. I stopped using an accountant 20 years ago. Preparing and submitting my tax return takes no more than an hour.
I have some insider knowledge here, and these posts make me crazy.
First, 99 times out of 100 when someone writes “The IRS does ___” they are wrong. It isn’t the IRS that writes the tax code; it’s Congress. It isn’t the IRS that funds websites and tools and such; it’s Congress. And Congress, collectively, wants people to hate taxes and hate the IRS and hate government.
Pro tip: any time the IRS manages to implement a public-facing free tool that actually does something useful for someone, that’s a huge win against intense opposition. If you wish it did more, for more people, write to your Congresspeople and demand that they fully fund the IRS to do its statutory jobs.
@DrDaveT: I agree with all of that. But the theme of the article was “Surprise! The federal government made a website that doesn’t stink” and everything in the article seemed to point in the opposite direction.
Given the reality that we will never have a less complex tax system, I must be the sole person in the country who thinks Turbo Tax is pretty great. I have managed a farm, an inherited trust with K1s, multiple rentals, investments, depreciation schedules of varying duration with items tracked over a period of 15 years – all within Turbo Tax.
Sure, I’d rather have things be more simple, but TT has always come through for us.
@MarkedMan:
The problem is people claiming to “care a great deal” but then doing nothing actually to achieve that.
This goes back to a point I frequently bring up here about how actions speak louder than words and about claimed vs revealed preferences. Sorry to pick on you, but the usual amount of “caring” is what you’ve just done here, which is to blame libertarians (as if they have any power in government) and Republicans and little else. Well, that excuse doesn’t work because Democrats are actually a big part of the problem.
You want examples? The most obvious one is California’s High Speed Rail project. Can’t blame the GoP or Libertarians for that one.
The same systemic problems we see there are also present at the federal level in all kinds of areas. I’m most familiar with the DoD. Just look at any DoD major weapons system project—most eventually turn out pretty good after an extra two decades of work and 2-3 times the initial budget (if we’re lucky).
When the Obamacare website snafu exposed the structural flaws in federal IT program management to the public, what happened? The GoP laughed and cynically used it for political advantage. The Obama administration and Democrats were embarrassed and quickly hired outside experts to fix it. Do you know what none of them did or even talked about, which I advocated for at the time? Reforming federal IT project management so it works better.
I’m sorry, but I don’t give people credit for claiming to care about effective government but then doing nothing when they have the power, authority, and opportunity to actually make improvements.