> please don't use this software to file your taxes for the 2020 / 2021 tax season.
I wonder if there is a PR that Intuit filed to add this to the readme.
Seriously, I wonder how much money Intuit has spent to terrify people into using their software. Each year, I look around for alternatives so I can avoid giving them money, and each year I find some reason to grow fearful of an IRS audit and go with the company that has convinced me they are less risky than anything else. I wonder if that is truth, or if I've been programmed to think that.
Unless you really screw up[1], or are intentionally trying to screw the IRS[2], you don't have to worry about an audit. The IRS's goal isn't to bring down their wrath upon you, their goal is to accurately collect the taxes they are due. If you pay too little, they'll ask you to pay the difference. If you pay too much, they'll refund it. Really: I once used the single-payer tax table instead of the filing-jointly tax table, and they sent me a nice letter explaining my error alongside a big check.
I agree with the basic premise that the IRS is nothing to be afraid of if you make a simple mistake. Though if you make a $5,000 error (which is getting out of "simple mistake" territory), they'll tack on a 20% penalty.
That being said, audits are incredibly annoying if you didn't make a mistake, especially if children are involved. The Examinations department of the IRS is hard-headed, to say the least, and they will often make any excuse to deny you credits that you are actually entitled to. In order to get a fair hearing, you have to appeal the case to court. (The U.S. has made the appeal and court processes pretty doable even for taxpayers without an attorney, though.)
Even besides the risk of pecuniary damage, the problem with an audit is that it can take a long time. It's a time sink for you where the best outcome is usually nothing different happens.
I made an error like that one year. It was as simple as me (personally) not receiving one of the 1099s from a few months of work my wife had done for a non-profit.
For those unaware: You get a 1099 when you're paid as a contractor, which means taxes haven't been taken out yet. It's fairly common for temp work and similar oddjobs that don't warrant a dedicated employee.
There was no audit in my case. They just sent me a letter that boiled down to that I had missed that 1099, and they were correct. I was just a little miffed that they waited almost a year to send that letter, which by then had higher interest / penalties than if I had been notified sooner. Still way better than an audit would be, though.
This is my experience too. I was audited and they do send you a "shock" letter or at least they did in my case claiming I owed roughly $15,000 USD. After fixing my mistakes (and submitting an updated filing), they sent me a check for a bit more than $1,500 USD. Plus I learned about my mistakes so it was a win-win (as I learned with just enough time to not repeat the same mistake for the next year's taxes).
I had an A+ experience being audited after my initial shock. They even have a secure message system where you can communicate via a website with the IRS including uploading files instead of having to mail letters back and forth. Definitely some clunkiness but overall it was solid and worked.
Not sure I'd recommend the experience but I definitely found it nothing to fear. I also found I didn't need professional assistance with being audited (I did seek it out but due to the time of year being so close to the next year's tax due date, I couldn't find someone right then so I decided to try fixing it myself).
It sounds like you got a letter from the IRS's automated underreporter program. I believe these are more common (and less painful) than an actual audit.
Any code authored by or for (exclusively) the government is default open. Usually all it takes is a FOIA request; if you're lucky they're publishing it on github already. However there are carve-outs for areas where making the code public could impede the law-enforcement mission of the entity that uses it, that is, FOIA exemption 7E. Since the IRS knows that if you knew how the audit worked*, then you'd do your taxes "just so" to avoid the thresholds by running the logic yourself, which is not something they'd want to encourage. And it would definitely increase their audit casework load.
There's also the issue that if the code wasn't bespoke but also sold to non-government entities for similar missions (i.e. government does not hold exclusive rights), then it can be protected as the contractors IP. But for the IRS this would be rare, they are pretty unique and often do things their own way.
* You can sort of do this without the code. The IRS is not allowed by legislation to base an audit decision on any information that is not covered by eFile, so contents of forms 1041QFT and 990T, or any attachments to what could have been an electronically submitted form, is out of scope. As long as what you submit in the core set of forms aren't statistical outliers, then you're good.
Unless it was written by a contractor who then gave the copyright to the IRS. This is a very common situation. The federal government is not barred from having copyrights.
It really isn't - the point is freedom access, not free use. Information acquired this way doesn't magically become public domain, it may (or may not) have other constraints on it.
Which begs the question if they essentially already know how much tax they think you should owe (for most people) why don't they present that number to get first and let you either agree or disagree?
If we view it as an error checking process, it's better to come up with the two numbers independently. Whether the improvement is worth the costs, I don't know.
IANAL, or an accountant, etc, but if I’ve learned anything from ravenously consuming Trump family news the past few years, it’s that ignorance of the law actually is a defense in cases around taxes, and the IRS has to satisfy a standard of proving bad intent in order to really screw you.
Again, IANAL, do your taxes, please. But it does seem like the system is legitimately designed with an ethos of just making sure taxes get collected and isn’t about being vindictive.
Having dealt with tax authorities in several countries, it's a recurring theme that they have no interest in coming down on you hard if you seem to be trying to do the right thing and make actual efforts at compliance, as they have their hands full putting actual effort into dealing with people actually trying to evade tax.
What I always do if in doubt is to attach a letter setting out my assumptions. I've outright had to tell the tax authorities I didn't know the real numbers one year, because I realised shortly before filing that I'd lost documentation in a move, and so a whole bunch of details were estimates. Even that was accepted without additional documentation.
Of course I'm sure there are countries that are worse.
There is no way that would work with the IRS. Anything you estimated and can't provide documentation for will automatically be considered void and non-existent by the IRS if that thing reduces your tax bill.
If you think you have about $5k in valid deductions, but you can't provide any documentation upon an audit, then that $5k will be reduced to exactly $0 and you will owe all additional taxes plus interest and penalties.
Paying for stuff like roads, highways, snowplows, schools, government workers, the military, that kind of thing. If you'd like a detailed response, you can look up the federal budget, and the state and city budgets relevant to your area.
I apologize - I am just so upset on how things are going and I am livid at the inability to make meaningful change for the positive while we all watch ourselves being robbed.
The fact that there is a "vote" on a 1.9 TRILLION additional stimulus, on top of the ~6 TRILLION previous thefts - the fact that in 2008, many senators and congress folk had their spouses create LLCs - then get stimulus and bailout funds just illustrates the corruption.
The situation is bananas right now.
And people are defending the system.
This is like if you have major outages to prod and instead of doing a proper post mortem to get to root cause on the failures, you re-up your contracts with the vendors who failed you and pay bonuses to execs and ops people who left the system in a position to fail, then have all the other employees yell at anyone who questions what the hell is going on.
I get emotional - isolation for the last year has made emotions bottle up...
But seriously this situation sucks.
Again, I apologize for certain things - but not my indignant opinion of the current political and technical climate we are forced to live in.
Most people without businesses don't need to worry about audits. IRS, of course, still audit a small percentage of the most simple and honest-looking returns. But that is mostly for how factories spot check products to ensure quality, not because they suspect you did something wrong.
On other hand, if you are audited, it is not a big deal as long as you were not intentionally defrauding IRS. My boss used to get audited almost every year for his business. IRS would ask for receipts, and once he provided those, it was end of story.
I've been using TaxAct for years, but I'm not sure they are better. They have every incentive to lobby with TurboTax to make sure it is hard to file taxes without help.
I'm tempted to go back to paper forms. It wasn't hard, just annoying the one time I forgot to copy line 13 of form 1234 to line 43d of form 5678 and then had to amend my state filings.
Yeah, truthfully I would rather not have to use TaxAct either. Since the IRS already knows what I owe, what's the point of filling out forms by hand?
Every year when I manually copy information from my W2 onto an online form, I think that tax season must be the biggest data entry clusterfuck in the world.
> Since the IRS already knows what I owe, what's the point of filling out forms by hand?
Complete agreement, though there will in some cases be a need to file forms to supply information that they don't already have. Additional deductions, for instance: charitable contributions, deductible expenses, etc. But those forms should be "here's the information", not "here's the information and a pile of careful calculations implementing an algorithm".
It holds your hand a lot less than taxcut or turbotax though. Its basically a very thin shim on top of the IRS forms and instructions. Other than the electronic filing and a couple pretty basic hints, once you have some history and are vaguely aware of tax credits for various things, its barely easier than the IRS instructions in the old paper tax forms.
I tend to use taxcut, which is a bit closer to turbotax, but frankly its messed up things that I only found by reading a paper copy of the return before filing and noticing numbers that didn't make sense (doubling values by adding imported values with hand entered ones, that kind of thing). I had problems like that with turbotax in the 1990's but haven't used it since the bootloader fiasco.
I have used TurboTax pretty much my entire working life and never have been audited. The one time I decided to use a professional due to "complex" tax issues that year, I was audited, which became a huge pain in the ass.
That software looks to be worked on primarily by two people in their spare time, spread out over a year, with most of the activity happening within the last couple months if I'm reading this correctly. Understandable that they still consider it to be in an early stage, and not ready for use by the public.
> Each year, I look around for alternatives so I can avoid giving them money
Why not pay an accountant? Why is everyone trying to do their own taxes? By the time you've spent a couple of hours looking for alternatives... you might as well have just paid a professional to do it!
It’s pretty simple to do your own taxes unless you have your own business and partnerships and whatnot.
Spend a couple hours reading the instructions, use the IRS free fillable forms website, and you do it once and every year after it’s quick and easy. Things don’t change much year to year. If you don’t understand, post a question a personal finance forum and someone will pipe in with an answer.
> It’s pretty simple to do your own taxes unless you have your own business and partnerships and whatnot.
IDK about that. As a non-resident alien for tax purposes for a couple of years I couldn't use any of the existing software (TurboTax, etc). I even tried to contact a tax accounting firm like HRBlock and they had no idea about things I needed to file that I discovered on my own reading the IRS publications. So I did the taxes on my own and every time it was the most painful thing happening that year (yes, that likely means I lead an otherwise stress-free life), it took 3 weeks at least spending most evenings a few hours making little progress on it each day. And at the end of it I never felt very confident about it and I likely left on the table possible deductions.
But if there's one thing doing that helped with is appreciate how easy and painless is to do it as a resident alien with something like TurboTax (takes a few hours instead of weeks) and it helped me understand the terms and instructions of some of the more complex issues that you may have to deal with even with TurboTax.
HRBlock is not a tax accounting firm. They are a service firm who hire people to sit in retail storefronts and key your info into TurboTax (or their internal equivalent).
You need a real CPA with a tax focus if you have "complicated" taxes.
It seems like you are (were) a good candidate for a more comprehensive service for sure. Perhaps a better wording would have been "it's pretty simple as a resident and (W-2) employee," which encompasses the majority of those filing, and who probably don't need a service like TurboTax or an accountant.
Actually IMHO, the difficulty with any of these things are tracking the right metrics. Particularly for "hobby" style businesses. You find out at the end of the year trying to avoid paying a bunch of taxes on something that didn't really make any money, that you mixed up or failed to compute your vehicle mileage correctly (or whatever).
So, having an accountant handling all the details, in the en puts the information at your fingertips that otherwise you have to scrape out of the box of receipts/etc. The tax filing parts are easy.
Mostly because it's an unpleasant task that can involve large sums of money if you put things in the wrong boxes. And even relatively straightforward brokerage accounts and second income sources start cranking up the complexity in a hurry.
I don’t know. But if you’ve opened up the IRS free fillable forms website, and put up the accompanying instructions on your second monitor, and know how to read English, I don’t see how it’s difficult, if you’re income is from a W-2. Everything is kind of labeled and laid out for you.
When I was in middle school (1980s) we did a tax return on paper, I think it was part of a Social Studies class? We were given a fictitious W2, number of dependents, etc. and had to fill out a 1040 and a State return (on paper of course, no computers then). This permanently demystified the process. I think a lot of people who pay HRBlock or similar to do their taxes have never tried to do their taxes manually and are just afraid to try.
I have always done my taxes myself, on paper, even years when I had capital gains, education credits, 1099s, and small business (single member LLC) income. It's a bit time consuming but not difficult per se.
I believe that's only for filing a federal tax return, and for filing your state tax return you still have to either use a tax preparation website or do it on paper.
Because everyone (for certain values of everyone) has a niche issue that current software doesn't address or addresses poorly, or they just don't want to pay for something that the government should provide. It's their damn tax code, the least they could do is make it as simple as possible to PAY THEM MONEY.
I used to do it myself when I was a W-2 employee, and I remember spending a few hours on it the first or second year, but after that it’s pretty quick since the process and forms don’t change much. Kids are just a couple credits and maybe a form for dependent care deductions.
But I also had a few hours to burn. I understand preferring to spend that time with kids instead. But it is worth noting that it’s a much smaller time commitment after the first couple years.
Why not just pay the nice mafia boss the protection money, and stop complaining?
First and foremost, it's a matter of principle. It's just not right to have the tax code written in the way it is written. It is written by special interests. If we all just said "complexity is no problem, we'll all just pay a small fee to accountants", not only will that "small fee" keep going up, but it will get more complex, and special interests will be better served to the detriment of everyone else.
Pragmatically I do hire a CPA, and in general like paying for the high level strategic advice. But the tax compliance services should be unnecessary. My tax returns should be a single text document that I can keep in git and copy/paste/update each year.
I 100% agree with you. I think it creates lots of weird artefacts. I really like the continuous nature of the crypto world and smart contracts, and think the world will slowly pay off the technical debt of wierd arbitrary schedules and move to a smoother, simple, more transparent system.
Mine sends me a tax planner every year. Yes, there are a bunch of questions up front but that's mostly to discover if I've had a change of status, some large transaction, a deduction I'm due, etc. Yes, I still have to round up my info but I don't need to figure out the right schedules, where to put the various data, etc. I get a pretty big sheaf of paper back.
I've never really been fearful of an audit. I just assume that if I DIY, I'm likely missing out on refunds I should have gotten because I didn't know where to look.
I wonder if there is a PR that Intuit filed to add this to the readme.
Seriously, I wonder how much money Intuit has spent to terrify people into using their software. Each year, I look around for alternatives so I can avoid giving them money, and each year I find some reason to grow fearful of an IRS audit and go with the company that has convinced me they are less risky than anything else. I wonder if that is truth, or if I've been programmed to think that.