More complex in the sense it would be harder for the average person to know the correct way to file to have the lowest tax burden?
I’m curious how it compares, I’ll save the anecdotes for now because that is all they are.
It is not more complex than Canadian or Quebec taxes, each of which are very complicated. I fill out all three. If I said more, I would be getting into IMHO territory.
Japanese taxes are very simple. There are only a limited number of deductions possible, and typically companies will file taxes for the employees.
What is a typical US tax return? Single or MFJ, income only from wages or minor other sources, like <$100 interest. Standard deduction, not many other deductions or credits. If they have kids it can be a tiny bit more complicated. More exemptions, and they have to remember child tax credit if not rich, or EITC if poor, or childcare deduction if applicable. Maybe tuition deduction or credit. All of these will be caught by any decent tax return program like TurboTax.
IMHO the “average person” would not deal with thinks like AMT, complicated investment income, self employment income (Sch. C).
Some US state taxes can be more or less complicated, and usually require you to finish your US return first (have the numbers, not file first).
Something like 40% of Americans can use the 1040EZ, a 1-page form that can be filled out in 10 minutes. if all you have is wages and ordinary interest (under $1,500 in interest per year), and have no need to itemize your deductions, BAM you’re done.
Where federal income tax gets complicated is where your income is complicated - self employed, employed in multiple states, farm owner, different types of capital gains, interest income in large sums, lottery/gambling winnings… stuff that is common enough to be sure, but doesn’t apply to loads of people.
Has the OP been out of the US so long he doesn’t know about Turbotax? For filers who cannot use 1040EZ, using Turbotax, a plain language questionairre that does calculations for you according to the IRS rules (or a human preparer who uses the same type of thing) usually covers the next level of complexity – simple income paired with simple investments, or self-employment, that sort of thing.
As a general rule, you have to have a good bit of money spread among multiple income and investment streams for your taxes to be complicated. Most people don’t.
If you have had multiple low-paying jobs in a year like I did, your taxes can be kind of complicated, but the hardest part is getting your employers to actually send you the W2s. Especially if you moved around a lot and the address they have on file is not where you actually live.
In the UK if you’re a standard wage earner (not self employed) then you don’t do any paperwork at all. You’re rate is calculated by Inland Revenue, provided to your employer, and it’s deducted automatically. It occasionally goes wrong, I slightly overpaid last year and got a refund of around £35.
This is the same in Canada - as long as you are a wage-earner with normal expenses (rent or property taxes, some minor medical stuff, RRSP -like an IRA) the tax return looks complicated, but you just fill in the blanks and it says things like “Now deduct the greater of $250 or line X”.
Where things really get complicated, is when youhave investments, capital gains, business income, losses from previous years to carry forward, and all that other stuff that was designed to make the tax code fairer (i.e. use a big loss from previous years to deduct from this years tax payable) but in fact, just makes things more complex.
I imagine a lot of the US code is the same.
The major difference is that, except for Quebec which likes to go it alone on these things, all the other provinces in Canada piggyback on the federal tax form. You pay taxes to the province you reside in on Dec. 31, generally, and any extra deductions for provincial tax code are just a separate page or 3 that you add to the federal form. There are AFAIK no city income taxes anywhere here.
I assume the USA is like Quebec, fill out multiple forms for multiple agencies - the feds, each state, and even places like NY City I understand have taxes.
This sight claims that Chad has the most complex tax system in the world, requiring 732 hours per year to comply. The US is 64th out of 183 countries.
New York City does have an income tax, but they collect it via the state income tax forms.
Property taxes are collected directly by the City, though.
My tax professor in law school liked to say that a tax can be simple, or it can be fair, but it can’t be both. If it’s simple, it will have clear rules and won’t make allowances for people’s different situations. If it’s fair, it will take many more things into account to ensure that everyone is taxed appropriately - but that makes it complex.
A little anecdotal but maybe this will offer some perspective. A few years back US Rep Charles Rangle got into hot water over unclaimed income. He claimed the tax code was complicated. He was chair of the House Ways and Means Committee. That committee writes the Goddamned tax code.
Dear god. Doing the math, that means you need to spend two hours every single day of the year working on your taxes. :eek:
Hey, it’s better than the Central African Republic, with a 203.8% tax rate (sum of profit, labor, and consumption taxes). I’m not exactly sure how that’s supposed to work.
Everything you said sounds familiar and used in the US.
IANA (current) tax person, but e.g. California makes you transfer over the numbers from your federal (which is why it’s a pain in the ass if the person already did their federal elsewhere). They “piggyback” in that sense, but you mail (if you’re still not e-filing) them to a separate location, e.g. for CA to the IRS and the Franchise Tax Board of California.
There are a few local income taxes (and many local payroll taxes). NYC is one, and Multnomah County, Oregon (around Portland). They are usually 1-page things that attach to state, and are generally easy because they want your money.
State taxes range in difficulty. Mine and a few others are easy because we don’t have income taxes. Some states have income but no sales taxes. At least one has neither (NH, but I think they do have taxes if you have tons of investment/interest income). As I said, I haven’t practiced in awhile, but I remember NYS, NJ, HI being trickier. And CA, but I got used to that one. I looked at a Guam return once, but referred the guy to someone else.