Tax simplification

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LEGAL BRIEF By Max Stul Oppenheimer, Esq. The Inflation Reduction Act gave the U.S. Treasury Department billions of dollars to create a world-class cu
[See the full post at: Tax simplification]

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ibe98765, jonaw, windbg, fisher75, WCHS, DLivesInTexas

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I’ve got to say that I have no idea why this topic/contribution is in the AskWoodyPlus newsletter.

Of course I didn’t read it.  I’m Canadian and American tax policy is of less than negligible interest to me.  But that’s exactly the point.  What is an article addressed exclusively to American people, about tax policy, doing in my hardware and software newsletter?  Sure, I get it that there are individuals out there who would have interest in tax policy issues – but wouldn’t they be better served to go search for information on a forum dedicated to tax policy where a robust discussion could take place – not on a computer geek forum where tax policy is of, at best, peripheral interest.

There’s not much wasted here, only a few electrons, but I’m having trouble seeing the value of those few electrons.  And, of course, ‘if you’re not interested, don’t read it’ – I didn’t….

2-bit contribution

Richard

 

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b

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Well (cough) the owner of this site is an Accountant so I have close interest in what any government does to handle online taxing information.

As an accountant there are several clients that come in and I think to myself  – why can’t the IRS just send them a bill? Why do they need me to fill out forms?

Turbotax is an annoying piece of online software that can hook into all of your bank accounts and also upsell you on all sorts of things. I say annoying because as it asks you questions and walks you through the interview process, sometimes it annoys me how it does this.  A yes no question would be better served.

I always find it fascinating how other countries file their taxes and how they file and what they tax.

Also interesting to note is how the issue of multi factor access and multiple people needing access to the same information.  Case in point is the EFTPS system where payroll tax payments are submitted.  They will be adding multi factor authentication to the site hooking into ID.me a third party MFA vendor.  Okay but what if you have multiple people (various accountants/bookkeepers) who need access to the SAME information of that business.  Is there a way to share MFA access?  There are times I need that information as well as my client.

Just the other day we requested a listing of all of our clients that we have full access to their information under what is called a “power of attorney”.  The information has be requested on a form under the freedom of information act and it’s sent to us on a CD rom.

The State of California recently has done similar upgrades in their tax services and it’s interesting to see the difference between the two.  California has a ‘chat’ ability so you don’t have to wait on the phone as we have to do for the IRS.

Conversely I was on the secretary of state for Texas’s web site the other day and to merely search for a business filing I had to pay $1 per search and enter in and save a credit card.

There is a huge IT project that will have to be undertaken .

Susan Bradley Patch Lady/Prudent patcher

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SueW, ibe98765, windbg

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I read it! And I appreciate the news. (I skip over parts of the Newsletter that are not in my bailiwick.)

It’s becoming more and more difficult to file a tax return, no matter how you cut it. Or to even ensure that you have paid enough in withholding by the end of the year.

I’ve used Turbo Tax for many, many years and I’m familiar with how it works. But, I have my own spreadsheet to calculate the year-end amount due, both state and federal. I can usually count on Turbo Tax having done a good job with the figures it’s given. And you can play around with it to test different scenarios.

But it’s not only especially difficult to predict whether enough will be withheld by year’s-end since a) bank rates keep changing every month or even every 2 weeks, but the IRS has also not made it possible to change withholding percentages by simply telling the employer/RMD distribution entity to change the percentage. The IRS is afraid the percentage will be lowered, and so requires filling out and filing a complicated form.

And then if you use the IRS website to direct-pay estimated tax in order to cover the tax bill at the end of year so as not to incur a penalty for not withholding enough, there’s the problem of being sure the IRS has recorded of the transaction — it’s a long wait to see updated records.

The whole system is such a mess!

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ibe98765

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And then if you use the IRS website to direct-pay estimated tax in order to cover the tax bill at the end of year so as not to incur a penalty for not withholding enough, there’s the problem of being sure the IRS has recorded of the transaction — it’s a long wait to see updated records.

I get emails from the IRS immediately that confirms each estimated tax payment made on their site. That being said I still don’t understand why a national sales tax in the US wouldn’t be a better way to fund the government. I realize such a system is not considered “progressive” enough and might adversely impact the tax accounting business but feel it would be much simpler.

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https://www.irs.gov/newsroom/for-california-storm-victims-irs-postpones-tax-filing-and-tax-payment-deadline-to-nov-16

IRS just shoved the California due date to November.  ON the day that taxes are due at 10:44 a.m.

 

Susan Bradley Patch Lady/Prudent patcher

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In regards to this:
“The Congressional Budget Office estimates that the additional $80 billion provided to the IRS by the IRA will increase federal revenue by more than $180 billion in the decade ahead,”

$80 billion x 10 years = $800 billion.
So where is the other $620 billion going?

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That’s not 80 billion per year, that’s 80 billion for the project that may take several years.

 

BREAKING: The IRS will launch its first free tax online filing tool for the 2024 tax season! The pilot program will be available in 13 states in English and Spanish.

Susan Bradley Patch Lady/Prudent patcher

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https://www.irs.gov/newsroom/irs-advances-innovative-direct-file-project-for-2024-tax-season-free-irs-run-pilot-option-projected-to-be-available-for-eligible-taxpayers-in-13-states

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Ah….   all this American stuff.   Who cares?

 

The organization called “Revenue Canada” has had online filing for a year or two already.  Then they have NETFILE, EFile, ReFILE, and ‘My Account’ which is really greek.

 

Who cares about that?

Ok, an accountant is the owner.  I get that.  Must be an american accountant I suppose……

 

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I’ve efiled with Revenue Canada and still use a software third party to ensure that I’m filling it out correctly.

And yes, I’m American 🙂

Susan Bradley Patch Lady/Prudent patcher

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Sorry, the american thing was really a bit of a bad joke.  Except to point out that your fine newsletter reaches far beyond America so material which is of interest to (essentially) only Americans may not be the best to post.  On the other hand one who isn’t paying much but getting good help (as in, from what you do and the help you offer) has to take what one is offered – no need to read that which one doesn’t want to read…

I too use separate software to file with Revenue Canada, mostly because that’s the way I’ve always done it and I’m familiar with the software.  But the ‘dedicated’ online service that Revenue Canada offers is, I think, likely to be of great value to those many with straightforward returns who might otherwise not bother to file returns and thereby miss out on the benefits of filing a tax return even if they have no payments or refunds to manage.  This is, as long as the RC software is simple enough for the technically unsophisticated – which is certainly not a given knowing our country’s bureaucrats….

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IRS piloting free TurboTax alternative in 13 states – with lots of catches

The IRS is piloting a free TurboTax alternative (Direct File), offering the benefits of the paid app without the price tag, but there are plenty of limitations for now…

The app promotes itself with the tagline “Snap, tap, done” as it lets you use your iPhone camera to take a photo of your W-2 form, and then automatically captures that information and loads it into the IRS tax return form. You can also begin the process on your phone, and then complete it on your Mac…

The initial pilot scheme is very limited.

First, it will only be available in 13 states. Nine of them were selected because they don’t have state income tax, simplifying the task that Direct File has to carry out:…

https://www.irs.gov/about-irs/strategic-plan/direct-file

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Perhaps if the IRS ran the tax code through ChatGPT, it could suggest some simplifications?

Although the reality is:

The US tax code and all the associated bits and pieces exist because special interest groups and wealthy individuals paid for all those loopholes via political campaign contributions.

The tax code will not be fixed or simplified until money is removed from politics. To do this would require that campaigns be shortened to less than 2 months, individual contributions be limited to less than $500 and special interest/PAC’s/company contributions be prohibited.

The probability of this ever happening is close to ZERO due to all the powerful stakeholders and special interests that benefit from complex tax rules.

Can you just imagine all the tax law firms, accountants, special interests, media that has tuned politics into a horse race and of course, the politicians saying, “Sure, go ahead and put us out of business”. [lol]

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FYI (for Americans only):

<hr />

A Welfare Analysis of Tax Audits Across the Income Distribution
William C. Boning, Nathaniel Hendren, Ben Sprung-Keyser & Ellen Stuart
Working Paper 31376
DOI 10.3386/w31376
Issue Date June 2023

We estimate the returns to IRS audits of taxpayers across the income distribution. We find an additional $1 spent auditing taxpayers above the 90th income percentile yields more than $12 in revenue, while audits of below-median income taxpayers yield $5. We draw upon comprehensive internal accounting information and audit-level enforcement logs to quantify the average costs and revenues associated with each audit. We begin by estimating the average initial return to all audits of US taxpayers filing in 2010-2014. On average, $1 in audit spending raises $2.17 in initial revenue. Audits of high-income taxpayers are more costly, but the additional revenue raised more than offsets the costs. Audits of the 99-99.9th percentile have a 3.2:1 return; audits of the top 0.1% return 6.3:1. We then exploit the 40% audit reduction between tax years 2010 and 2014 to examine the returns to marginal audits. We find they exceed the returns to average audits. Revenues remain relatively unchanged but marginal costs fall below average costs due to economies of scale. Next, we use randomly selected audits to examine the impact of an initial audit on future revenue. This specific deterrence effect produces at least three times more revenue than the initial audit. Deterrence effects are relatively consistent across the income distribution. This results in the 12:1 return above the 90th percentile. We conclude by estimating the welfare consequences of audits using the MVPF framework and comparing audits to other revenue raising policies. We find that audits raise revenue at lower welfare cost.
…
https://www.nber.org/papers/w31376

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Just Another Geek

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Richard Merchant wrote:

Except to point out that your fine newsletter reaches far beyond America so material which is of interest to (essentially) only Americans may not be the best to post.

We are delighted that our readership is international in scope and welcome it. However, 95% of our readership is in the United States.

The real point of Max’s column is not to describe the American tax system but to point out that the complexity of the system is such that matters of fact, privacy, and security are at risk.  That theme is likely to be true for any country.

That is why the article is tagged with “privacy” and “security.”

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SueW, TechTango, ibe98765

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I enjoy Max’s columns.  Too many in technology suffer from tunnel vison.

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WSraysig, Will Fastie

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Articles like this are a discouragement for me to pay a membership fee.

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There are over 200 articles, monthly multiple revisions to the Patch master list and at least two alerts a month.  I think we can be allowed to have one article that someone has less interest in.

No matter where you are located, an individual or a company you deal with may interact with the American tax system. The risks that come from upgrading it’s antiquated software and processes are huge.

How it mandates online access may set precedent for other vendors to follow.  Already I’ve seen the IRS mandate for accountants the use of ID.me and we have to go through a process of taking a ‘selfie’ with a camera or a phone in order to sign up. It remains to be seen how this will impact other software as well.  Stay tuned.

Susan Bradley Patch Lady/Prudent patcher

7 users thanked author for this post.

Charlie, SueW, WCHS, windbg, TechTango, pmcjr6142, ibe98765

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Susan Bradley wrote:

mandate … the use of ID.me and we have to go through a process of taking a ‘selfie’ with a camera or a phone in order to sign up.

About 6 months ago, I tried to set up an IRS account, as an individual (and not an accountant), to make an estimated tax payment in order to be sure that I wouldn’t incur a tax penalty when filing my 2023 taxes, for not having withheld enough. I couldn’t get past the ID.me step that required that I take a selfie with my phone, because I don’t have a phone!!

The ID.me process has improved since then. It now has steps for identification without a mobile phone selfie. Someone from ID.me activates the camera and microphone on your device (or maybe you activate the camera microphone for ID.me — I don’t remember), ID.me looks at you through the device camera, talks to you, matches it with the photo on your drivers license, and then moves you on to the next steps to complete signing up.

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windbg

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WCHS wrote:

The ID.me process has improved since then

You trust that site not to sell your selfies (hackers, identity thieves…)

I wouldn’t

https://www.reuters.com/technology/identity-check-contractor-idme-fires-dozens-fraud-team-congress-probes-2022-04-26/

https://www.reddit.com/r/IDmeSupport/comments/n3exk9/wait_til_idme_is_hacked/

https://help.id.me/hc/en-us/articles/1500002603702-I-think-I-ve-been-scammed-What-should-I-do-next-

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windbg

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