Here's a fun example of why the government should maintain its own databases and use them to pre-fill your taxes.<p>This year, the state sent me a letter claiming I had paid zero taxes in 2010. They said I had to pay 100% of my tax liability right away or face liens, etc.. Of course, this was patently untrue--my employer had actually withheld more than my total tax liability for 2010. (I know this because I still have my 2010 W-2). So I was entitled to a refund for 2010, but the state was saying I owed them the full amount, plus penalties.<p>After contacting the state about this, they said the problem was that my W-2 form had likely become "detached" from my 2010 return.<p>So apparently, the state relies on a <i>paper copy of your W-2 attached to your return</i> to determine whether your employer has paid them the withheld taxes. If they can't find the W-2 you send them, they assume your employer didn't pay them anything on your behalf. Given that employers are already making electronic payments each quarter, why can't the government just derive its W-2 data from that? (I know, I know--they're probably not collecting that data right now. But the point is they could do it as part of the quarterly payment process.)<p>EDIT: Another funny bit to this story. I asked the state to confirm that my employer had indeed paid the amount reflected on my W-2. I figured that if the error was on my employer's end, I could take it up with them. But the state refused to say one way or another, citing confidentiality.
As a developer who's married to a CPA, here are my thoughts:<p>1. Taxes are a hard problem. Besides basic W2s, There are a lot of deductions to know about, and it's hard to keep track of all of them.<p>2. Depreciation schedules. They vary from item to item, and there's a bit of a grey area on what you can use, and what you can't. What can have bonus depreciation?<p>3. Calculating cost basis is too damn hard for most of us. Not just stocks, but partnerships as well.<p>4. When can you take a distribution from a business? How many times is that money taxed?<p>5. Add another 50 use cases, one for each state.<p>6. How do the states interact for individuals with diverse activity? Easily 2^50 cases here, and my gut say more like 50!<p>7. Foreign activity. Good luck with that.<p>The bottom line is there still is enough complexity that this needs to be done manually. Not to mention there are a lot of things that are legitimate judgement calls, and vary from accountant to accountant (or auditor to auditor when dealing with the IRS).<p>So, that's why robot's aren't doing my taxes any time soon.
I was on a StartupBus to SXSW this year- at the pitching stage, one of the guys pitched an idea based around simplifying people's taxes. He was a qualified CPA himself, and had years of experience working in the tax industry. No-one volunteered to work on his idea. The winning StartupBus team was a site that let you make your own custom breakfast cereal.<p>I suspect that if we want to ask "why isn't tedious process [x] automated by now?", we should be looking at ourselves for answers.
There exists a school of thought that says making taxes painful is a great way to remind you that taxes have visible consequences on your life just like spending does, which is a point of non-trivial interest ot the American polity. Someone subscribing to that school of thought might rationally oppose non-economic ways to make taxation less painful as a way to prevent a transition to invisible (or even fun!) higher taxes.<p>I'm stopping here to avoid committing politics on HN.
It can be done. In the UK, most people don't even do a tax return. And let's say you're self employed.. if your tax affairs are reasonably straight forward, you fill out a handful of numbers and dates on a Web site, get an estimated tax bill within minutes, and you're done. You then get sent a proper statement later. In a system with flat taxes, it'd be even easier.<p>I think the author touches on the real problems in the last couple of paragraphs. The American government isn't particularly good at spearheading initiatives that benefit voters without allowing "lobbyists" or commercial interests to take over. It also doesn't help that you have the federal and state structure (as good as it may be for other things) since the decisions can't be taken by one central place given all the local tax laws.
I'm pretty sure Intuit lobbied pretty hard to kill any and all progress that would allow most people to have their taxes automatically completed for them, equivalent to the 1040AUTO mentioned in some of the other comments.<p><a href="http://www.techdirt.com/articles/20100723/09055310339.shtml" rel="nofollow">http://www.techdirt.com/articles/20100723/09055310339.shtml</a>
My father did mainframe dev contract work for the IRS and once told me it's a miracle you even get your tax returns every year. :) There's quite a mess behind the scenes due to a number of failed new projects at the cost of taxpayer money.<p>I wish we could automate all of this but taxes themselves are also still a sort of art with all the exceptions. Technically there are rules about when you qualify for things but from my experience accounting firms operate more like law firms in that they help you figure out how to meet the bare minimum to legally qualify for various returns.
THIS:<p>"Better yet: since the agency is already receiving that data from all those financial institutions through a separate stream, how about organizing the data for me and simply letting me sign off on my automatically-generated return? I suspect that a lot of people would like that, given that the alternative is spending a spring day doing paperwork."<p>Especially for those who only have a single W2 or a similarly simple state of affairs, it is quite ridiculous the amount of pain you have to go through (and preparation fees you have to pay) CONSIDERING THE GOVERNMENT ALREADY HAS THE INFORMATION!<p>I definitely think tax preparation firms are lobbying to keep from simplifying the preparation process.<p>I remember one year around 2005 or so I was able to file my (federal) return by telephone directly with the IRS for FREE (I was a student and had only the one W2) and it was relatively painless but the next year the option seems to have disappeared. Anyone remember that?
I once complained on a message board that sales tax should be included in the sticker price, so that I know ahead of time what I'm going to pay.<p>I still feel that way, but someone pointed out that it would further hide from consumers the fact that the government takes money out of every transaction. Now I contend that every sticker should tell me both the price with taxes, and the price without. This would make it very clear how much I would have to pay without government intrusion, and how much extra they get from me.<p>I'm getting the same vibe here with income taxes. Taxes used to be a <i>much</i> more contentious issue before it was taken out of every paycheck prior to the worker seeing the money. Now the single pain point in paying taxes is an hour's worth of paperwork once a year. Eliminate that friction, and the government becomes an invisible siphon, sucking money right out of the economy, with hardly anyone noticing.<p>By all means, make paying taxes easier, but don't obscure the fact that someone is taking your money, all the time, without giving you a choice in the matter.
I'm working on a tax startup. The two products we're working on right now is taxcast.co (semi-finalist on the startupbus at SXSW) and autotax.me.<p>Taxcast.co is a system that forecasts your tax deductions, audit proofs your information and calculates your current and future tax liability.<p>you can check out the demo here: <a href="http://www.youtube.com/watch?v=-4CuvWkKW4w&context=C44040d8ADvjVQa1PpcFMR8iGVGidoILkFShlJzk1Av-qJay210Hw=" rel="nofollow">http://www.youtube.com/watch?v=-4CuvWkKW4w&context=C4404...</a><p>Autotax.me is going to help you deal with your independent contractors. It contracts, files and audit proofs your 1099 taxes. It's almost like an HR/Tax service in one.<p>You can check it out now but its still really rough/ugly. The functions work but there's no real UI so that's what I'm going to be finishing up.<p>Any questions, you can check out cameronkeng.com<p>if you're interested in any of these products, shoot me an email at cameronkeng@gmail.com or tweet me @cameronkeng =D
I work on optimization software and I'm pretty sure you could do some serious damage to the government's tax collection efforts if you hooked up a genetic algorithm to some very good accounting software to minimize taxes.<p>The problem with GA's is that they frequently exploit loopholes in their setups, so you get solutions that technically satisfy your evaluation criteria but it's not what you really want. This process is basically what corporate accountants do manually to get ridiculously low tax rates for big companies. Congress writes the tax code but it will always have loopholes, and GA's will definitely find them.<p>Here's a recent blog post of mine that goes into some of the problems with GA's, which when you're looking for loopholes is actually a huge advantage:<p><a href="http://designbyrobots.com/2012/03/29/evolution-is-cleverer-than-you/" rel="nofollow">http://designbyrobots.com/2012/03/29/evolution-is-cleverer-t...</a>
Auto-generating a tax return is one thing. Taking advantage of all your potential tax benefits and considering your edge cases is another thing. I've seen tax returns for many of inDinero's customers, and it's clear to me that their previous accountants took shortcuts in compiling the return.<p>Yes, it'll get filed. But there were probably more tax advantageous things they could have / should have done. Consider these examples:<p>1 - tax credits. How is the government supposed to automatically know that you're paying for child care? How are they to know that you just installed solar panels on your roof or that you just purchased an electric vehicle? Sure, they can make this "automatic" -- but then you'd still be going out of your way to report your purchase, and this is in no way simpler than the current solution today.<p>2 - does it make sense to be taxed as a partnership or sole-proprietor? For a lot of our customers, they're basically flushing $20k down the toilet because they didn't want to go through the tiny nuisance of filing as an S-Corporation. Pretty sure you don't want the IRS to dictate your tax treatment.<p>3 - should you depreciate your Aeron chairs over multiple years, or do accelerated depreciation which will allow you to deduct the entire amount in a single year? The IRS gives us the flexibility to choose, and it's questions like these that may require the help of a tax professional.<p>4 - deducting vehicle expenses. How is the IRS supposed to figure out how many miles on your car were used for business VS personal purposes?<p>5 - what part of your apartment was used exclusively for hacking? No way for the IRS to know that the number is 250/1500 square feet.<p>In short, putting together a tax return isn't that hard. The difficult part is hunting down all of this other information that we have no way of just knowing.<p>Instead of asking why robots couldn't be doing our taxes by now, we might rephrase the question to read "how can we do year-round accounting in such a way that taxes are 10X easier to take care of?"
The real problem is not the lack of systems but the ridiculous complexity of tax law. Since the complexity is unlikely to go away any system would have to handle it - and this is not an easy task.<p>Given that the OP works for an organization which is "focused on digitization of government data" it is quite peculiar that he doesn't understand the problem domain any better. It's quite a joke to think that it's a matter of throwing in some web forms here and there.<p>In complexity I would say it's up there with his favorite Apollo quote. Maybe not on par - but close. Just thinking about the size of the rule engine which is required makes my head hurt.
Estonia could be a good model for this - supposedly over 90% of people file online within 5 minutes.<p><a href="http://www.guardian.co.uk/technology/2012/apr/15/estonia-ussr-shadow-internet-titan" rel="nofollow">http://www.guardian.co.uk/technology/2012/apr/15/estonia-uss...</a>
I owed them money a few years back and had to pay them using some online payment system.<p>It was necessary to do this because they failed to implement the payment plan that they agreed to. So interest was piling up and they weren't withdrawing what I owed them.<p>So I sign up on this system. They had to MAIL me the password. By USPS mail!<p>So it finally comes. I log in and pay off the entire amount.<p>Later, I find out that the system applied the payment to the wrong year. Apparently this was my fault somehow, as the system defaults to the current year, not the year that you owe on.<p>So I have to call to get that straightened out. The person applies the payment to the correct year. yea!<p>Now can I find out my balance? Is it paid off? "Let me transfer you to the department that can do that."<p>Apparently, that's a different skill set altogether. No way to check it online. Why would you ever need to do that?<p>Finally get to a person who can tell me. And it turns out they started the original withdrawal of funds from my bank. So now they owed ME money.<p>And that came by paper check, delivered by USPS of course.
Beware answered prayers.<p>Over in my corner, we have a State provided income tax simulator and filer. Not too pretty, but correct and useful; it's done in Java and runs under Windows, MacOS and Linux.<p>It's been so successful that most tax returns are nowadays filed with it, and quite a few public offices where people used to queue up to file their (paper) returns have been closed. There was never much of a setup/tradition of filing by mail like in the U.S.<p>Over the last couple of years, they've improved data cross-referencing to the point where I can get most of my form pre-filled from the government.
The thing is, complicate tax code is merely a welfare program for tax lawyers and accountants. If we made taxes easy, or automated parts of the process that are the same for everyone, we would be cutting off the supply of money to the leeches. Since they don't want that, and they are better at being parasites than the groups normally attacked for parasitism (teachers, postal workers etc), they successfully lobby against making taxes easier for most people.
Belgium has had this for a few years now. In my case everything is prefilled, even the deduction for charitable donations. Basically this is a US-specific problem.<p>You can see a flash demo (in dutch) of the belgian tax-on-web app here: <a href="https://eservices.minfin.fgov.be/taxonweb/static/nl/demo_v2/player.html" rel="nofollow">https://eservices.minfin.fgov.be/taxonweb/static/nl/demo_v2/...</a>
If I was ever elected president, I would direct congress to reduce the size of the tax code by 10% each year. If they fail to do so then 10% are automatically eliminated - eg all those whose last digit of the article number is 3.<p>The real reason for why things are so screwed up is corrupt politicians who use their power as a fund raising mechanism. For example there were several taxes added temporarily to see if they worked well. They did, but congress doesn't make them permanent. Instead they wait to be paid each time to renew them temporarily again. (This started in the Reagan administration.)<p>See this excellent talk by Lessig: <a href="http://www.youtube.com/watch?v=Ik1AK56FtVc" rel="nofollow">http://www.youtube.com/watch?v=Ik1AK56FtVc</a><p>The whole tax provisions as fund raising is covered at 7m30s.
I'm not sure what the comparison between UK (where I am) and US taxes is, but I found the process here very easy. I load up an online form, I fill in the data and click submit, they tell me how much I owe and I pay. Very easy, the hardest part is saying goodbye to all that money.
It won't be happening any time soon. Here's why:<p><a href="http://www.republicreport.org/2012/corruption-taxes-fivemins/" rel="nofollow">http://www.republicreport.org/2012/corruption-taxes-fivemins...</a>
This seems like a startup opportunity. Take photos of your standardized forms, upload them to a server, server calculates your taxes, only asking questions when the pertinent data is missing from the forms.<p>IMHO this service should be offered by the government(s) themselves (and if it was, it would mean even less data needed to be entered; after all, they have copies of all your forms already), but fat chance on that.
Assuming our tax law remains insane, I actually prefer having private tax preparers. The IRS's incentive is clearly to make me pay much tax as possible, whereas for private tax preparers it's to make me pay as little tax as possible.<p>If our tax law were simple there wouldn't be much difference between the two, but in its current state there is. Thus I think the tension between the two groups is healthy.
My concern about this is that if we fail to simplify taxation laws before any singularity then we'll reach the point where only robots are capable of processing taxes.<p>I have to echo the comments here about the UK system. It's unbelievable to someone that's only experienced the Inland Revenue, but they're about the biggest non-event ever when compared to their equivalents elsewhere.
Some countries do already. In Norway, you get a your tax papers (well, paper; it's only one sheet) pre-filled. You only have to take action if they got it wrong.<p>At least this works for normal employees. It gets slightly worse when you have your own company.
I do my taxes on paper!<p>I'm a professional software engineer. I know how software works and how it doesn't work.<p>I don't trust automated tax software at all.<p>Fortunately, even the 1040 long form is a simple pen&paper algorithm that I can do in a couple hours.
The flawed assumption being that tithes are solely financial. The government would be content to burn your "money" in a pit; your submission and mental buy-in are what it's really after.
There are many good reasons to move to the US but having just done so I look around at friends filing and complaining about their taxes and dread having to do it myself.
The 1040EZ is not exactly a hard form to fill out:
<a href="http://www.irs.gov/pub/irs-pdf/f1040ez.pdf" rel="nofollow">http://www.irs.gov/pub/irs-pdf/f1040ez.pdf</a><p>One side of a piece of paper. You enter 12 numbers, and need to look up one value in a table too see how much tax you owe.
SEVERAL countries does taxes electronically --and i don't mean the lame way irs does here, where doing it eletronically means auto-filling two boxes in the PDF to take somewhere else later. Brazil, 3rd world mind you, has a java application (for years) where you fill in some boxes and it not only calculates everything it also allows you to compare different ways to use your exemptions. It's not very good if you have a corporation, but that's because they choose so. not because oh my god it's impossible to code something so complex.<p>Everyone talking about how difficult it is to implement all the rules have no idea how software works apparently. if it's already worded as rules, you can code something to work with them just like a human reading those rules. People code more complex systems than taxes every hour.<p>Now, if you take the irs.gov experience i just had this month... every link is link-bait to PAID services. And that's the ONLY reason we don't have robots doing our taxes.<p>Someone that already have robots doing our taxes make enough money to pass legislations that allows them to put links in the IRS own site that have more visibility than link to the forms.<p>tl;dr capitalism, bitches.