- cross-posted to:
- comicstrips@lemmy.world
- cross-posted to:
- comicstrips@lemmy.world
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They don’t actually know. If they think something looks suspicious, they do an audit, and then they know.
The vast majority of people’s taxes fillings are taken on good faith.
I got audited a few years back. I claimed something that set off a red flag–deducted tuition for a grad program as a business expense.
I freaked out at first because I thought I must have messed something up or that they knew I messed something up.
What I discovered is that: at the end of the day these folks are probably just as annoyed as you that they got another “audit” in their pile. And being flagged doesn’t mean you are wrong. It means they need more information before they can decide.
I wrote a detailed response with the actual flow chart from their own guidance, I circled the decisions on the chart, and then provided proof of each decision in my letter. Basically I held their hand and showed them I could legit deduct it.
They were like “oh, cool thanks! You’re good. Actually, you could have itemized x if you have receipts for it and you’d get a bigg r deduction if you wanted to amend”
That’s when I realized they don’t really check everyone’s taxes at all. They have a system that flags certain situations for further review. I guess, in my case, people lie or mess up this tuition deduction a lot so they double check.
“Listen bub, I’m just telling you what Intuit and H&R block pays me to tell you. So yeah, I both know and don’t know what you owe. Let’s call it Schrodinger’s taxes and call it a day.”
I hate fucking taxes. Just stayed on a call with Fidelity because I overpaid my 401k by a few dollars and they don’t know how to set a reimbursement. Now I’m on a call with Anthem because they don’t know why I never got my 1099-SA. Fuck. I really fucking hate taxes.
because they won’t tell you about the loop holes and exceptions you could be taking advantage of.
God, I would hate to have to work out my taxes every year laughs in British
Hey, some of us do have to do taxes, but you pretty much follow a questionnaire on the gov.uk website then fill out some numbers from paperwork you’ll already have (P60, payslips, etc). I had to whip out the calculator once to add up 12 numbers for my student loan.
Could probably do it in under an hour if you’re not doing anything unusual.
The American system sounds very much not that.
For many Americans it’s actually pretty simple as long as they’re working with a standard W-2 (form you get from your employer with the year’s wages and taxes and stuff filled out). Many tax prep services will even import these numbers automatically and all you have to do is click through the questions and optional things like if you want to donate your returns to anything or pay estimated taxes for the next year - mostly stuff that most people aren’t concerned with anyway.
Taxes here start getting complicated when you are an independent contractor (you’re responsible for holding out taxes from your income since you don’t have an employer to do it for you) and/or have non-standard sources of income like stocks, shares, real estate holdings, etc. which the IRS may or may not have information on, thus why you need to provide the info.
Most of what has made calculating taxes and paying/getting returns a pain in the ass is tax prep companies like TurboTax lobbying to make and keep the tax filing process a confusing one, with the goal of steering you into paying for the non-free filing options.
Even then buying and selling stocks, having a 401k, IRA, etc. doesn’t even make it complicated. You just have to fill out a 1099-B/DIV/INT and then list your contributions to your retirement accounts.
I don’t know why people pretend it’s so hard. You spend 30 minutes every year answering a few questions and punching numbers into boxes from a few documents that are sent to you by your broker/bank/employer. It’s also only $15 at FreeTaxUSA.
Opening the accounts you report to the IRS is arguably more difficult than filing them on your taxes.
The main point I think is that American taxes aren’t typically difficult, but rather inconvenient - by design of the tax prep companies lobbying to keep it that way.
Oh interesting yeah, so doesn’t actually sound too complex for most people then.
I’m a little confused about the last part, what are the main differences between paid and free services if it’s as simple as you describe with the W-2 form?
The legal requirement for tax prep services like turbo tax to offer free filling is, in true capitalist style, a qualified one. All they’re really required to offer for free is the basic tax return form - Form 1040. Even with a typical W-2 job, you may have additional non-standard forms to fill out, particularly relating to healthcare coverage since here in America, of course that’s tied to your employment.
When you start getting those non-standard forms, tax prep services can start charging you to upgrade to the premium tier that handles those forms for you - your alternative being to file online what you can for free and doing the rest by hand, but being non-standard forms they of course read like stereo instructions so good luck with that.
At first it doesn’t seem that bad - you sigh and say, “Fine, it’s only $32.” But then you get to the last page and find out it’s $32 for each return filed - most Americans file at least 2, federal and state. So now it’s $64. And say you’re in my situation where you live in a city that straddles a state line - many here work in one state but live in another, so that a federal and two state returns. Now we’re up to $96. You want your returns direct deposited to your bank instead of a paper check? Another fee, because fuck trees. So by the time it’s over you’re paying over $100 in essentially convenience fees for the very companies that make tax prep miserable to do it all for you. To make you feel better about it the services will say you’re also getting stuff like audit protection and various other fluff, nothing that really costs them anything to provide.
I enter in my w4 and take the standard deduction. Takes me 5 minutes.
Haven’t owed since I had a retail job that reset my withholding when I got promoted to make it look like I got a bigger raise.
Do you not earn interest on any accounts? No loans on which you pay interest? Are you a student?
Like I said: standard deduction. Those numbers never come close to make itemized deductions worth the time and effort.
Interest is income, so your W-2 won’t be enough to account for that. You’ll also need to go to any banks, taxable brokerage accounts, etc, because that money will impact your taxable income. Still not a ton of work, but it’s still more than just W-2 + standard deduction.
Most people aren’t going to have anywhere near enough taxable investment income for that to matter.
I think I got about $.87 in interest payments from bank accounts in the past year. I don’t think that’s going to make a huge difference in taxable income.
You need a better bank account then.
Let’s say you have $10k in cash (typical emergency fund) and get 4% on it (relatively competitiv; e.g. Ally gives 4.25%), that’s $400 in interest (not including compounding), which is a reportable amount of income. If you’re doing something clever or have a bit more cash for some reason (e.g. saving for a house), you could easily get into more interesting amounts of money.
$10k in cash (typical emergency fund)
There’s your mistake right there, thinking people have even $10k to serve as a spare emergency fund.
I don’t even have a thousand spare right now for an emergency.
Yea I appreciate the dude trying to make sure people don’t forget stuff and get fucked by the irs but he’s a bit privileged thinking we’re all as well off as he is.
pan to tax preparation companies taking turns sucking off Uncle Sam
My son made a mistake on his state taxes and his return was rejected. The letter he got back basically said “we couldn’t verify your reported property taxes, so you can resubmit a correction or do nothing and accept our version of your taxes” (where he gets back about $200 less because of a typo.)
So, like, yeah. They’re just comparing your notes to theirs, with the default benefiting the state.
Seems like the property taxes would be the easiest thing in the world for them to verify. Unless they’ve been lying to themselves.
There’s a lot. Every tax form you get is submitted to the government as well. W2,1095 a, 1099, property taxes etc. For most people, the government could just send a letter saying: we have all the documents. Do you want to itemize or take a standard deduction? Do you have anything else to report? Cool. The people that would still have complicated taxes would be the self employed.
Yes, it would be helpful if people didn’t have to chase down a bunch of forms that were submitted to the IRS already. But for instance in our family there’s a lot of medical expenses, well over the minimum for us to deduct them, so we’d still want to do that.
Yeah itemized deductions would still need to be offered, but for many people the work would be minimal since it usually makes sense to select the standard deduction. That’s horrible that you even have to pay that much for medical expenses but that’s a whole other conversation lol.
The answer of course is that the IRS doesn’t know how much you owe, and it isn’t feasible for them for figure out exact numbers for everyone with the tax code as complicated as it is. So, they audit a fraction of Americans every year to keep everyone honest. It’s a bad system that taxes are so complicated but it’s not a conspiracy.
It absolutely is a conspiracy though:
Except the federal government literally this year started instituting a free, public filling service to get around TurboTax. And they fought it tooth and nail.
There is a conspiracy, but it’s not a federal government conspiracy. It’s just a bad system that certain companies conspired to take advantage of.
works as well with just the last two panels
Wow, yeah – way punchier
