For me anyway, and possibly for most filers, the IRS has already received copies of your W2, 1099s, 1098s, etc. Couldn’t they just send you a bill or a refund and you could file an amended return if circumstances had changed for you (like you got divorced or had another child)? I expect it’s not that simple, but it wouldn’t be the first time that government did something the dumb way, so I thought I’d ask.
You actually don’t have to file taxes as long as you don’t owe anything. But if you are owed a refund, you have to file to document any deductions (or choose the standard deduction) and therefore calculate the amount of your refund.
Seeing such faith in the Federal Government is very refreshing.
I suspect things may get to the point where a ‘choose default refund’ is an option as things become more centralized and organized. I suspect that for me, although Canada Revenue has already got its copy of my T-4, and could get the RRSP numbers off my banks instantly in the event of an audit, they either don’t bother gathering the latter automatically or can’t be bothered correlating it automatically.
On the other hand, the new TFSA program is administered entirely between the banks and the government; you can get dinged on your taxes if you accidentally ‘overcontribute’, but don’t list your contributions on your tax refund or routinely get confirmation of how much contribution room you have left. (I think there’s an automated number at Canada Revenue you can punch your SIN number into if you need to check how much you can add to your tax-free without going over.)
If you lived in Norway, you wouldn’t have to, depending slightly on the details of your economic affairs. The Norwegian Tax Administration receives most of the necessary information from banks, employers, building societies and charities (to list the ones I know send in information about my transactions and property) and they send me their calculations. For the last few years, if I consider the numbers sent me to be correct, I don’t need to do anything, just pay any taxes owed or await my refund.
True, but plenty of other countries’ tax programs work pretty much the way the OP describes. Certainly for folks with complicated returns there’d still be work involved, but I’d bet the IRS could get it right for the majority of US citizens, and send filled-out forms. Pretty much everybody I work with who doesn’t come from the US laughs at our tax filing process.
I’ve asked the IRS this question a few times. :rolleyes: They’ll compute your taxes for you if you insist, but make the most adverse assumptions – 1 exemption only, probably assume “Married Separate” filing status. And (even though brokers now often supply IRS with basis cost info, IIUC) they’ll assume basis cost of zero for any stock or bond sales reported to them. :smack:
There are all sorts of incomes and expenses that aren’t explicitly declared to the IRS that you are required to (or in the case of deductible expenses, may want to) declare on your tax return.
Made a tax-deductible charitable donation? You may have a letter/receipt to document it, but the IRS isn’t aware of it, and you’ll want to declare it to lower your tax bill.
Won some money in Vegas? Found 10 million dollars worth of gold coins in your backyard? The IRS isn’t aware of your good fortune, but you are legally required to declare those income streams.
Me? I’ve got a small business operating out of my basement. Customers pay me via personal check and PayPal, and I have to declare that income; I also get to declare my expenses for tools that I buy, mileage, and other expenses. The IRS doesn’t know about any of this stuff, so it’s up to me to tell them on my tax return.
Actually, the State of CA has started a program that does something similar to this. You enter a few numbers, they then say “is this correct?” you say yes, they compute.
But let us say you got some "off books’ income- quite a bit of it. And the IRS did have such a program as the Op wants and computed your taxes based upon known info, sent you a refund,etc. You’d have a very good defense against add’l taxes or charges of tax fraud on the un-reported income.
It’d have to be something like what the State does, where if you have had a history of filing plain 1040EZ, you’d just verify by means of a password what the IRS said they had for you. But that would be based upon the fact that yes, you have verified the info shown and yes, that’s all you have.
One little known income source that is supposed to be declared is per diem money that isn’t spent on your trip, but rather ends up in your bank account. If you’re given $100 for a day’s per diem and you only spend 50, the other 50 is income. In all the years that I traveled, I never bothered to declare it and I never knew anybody who did (or even who realized that they should). Of course, it’s one of those things that is almost impossible to verify in an audit.
You’re also expected to report any income that you earned outside of your regular job. For example say you sold a valuable Beatles album for $500 that cost you $5. That is $495 of profit that you are supposed to report.
Everybody knows when you’ve found 10 million dollars worth of gold coins in your backyard.
No,everyone (including the government) assumes that if you admit to finding 10 million is gold coins in your back yard that it must really be more like 25 million.
I think there’s another thing going on: The government doesn’t trust you. Just look at the insane hoops that almost every government agency, at every government level, makes you jump through every time you interact with them, to prove any and all information you provide. (Do I need to give examples?) (ETA: Just saw Si Amigo’s post, just above, after posting this one. So much for government trusting us.)
The IRS is a biggie in this respect, for obvious reason. Lots of people want to cheat on their taxes.
So, to minimize tax fraud, the IRS attempts to gather as much information as it can about your finances, from as many sources as possible, and with as much redundancy and duplication as reasonably possible. By collecting duplicated information about you from many sources, it becomes possible to compare all those sources, to look for discrepancies. By requiring you to fill out tax forms, containing a bunch of information that they are also getting from other sources, they have a mechanism to cross-check on your honesty, and also on the honesty of the other sources who are providing information.
I’ve always wondered, though, why we must attach a copy of our W-2’s to our returns, but not our 1099’s.
Nope, the point of per diem is that you don’t have to itemize your expenses. There would be no point in per diem if you had to go back and justify each line item.
I remember many years ago in Canada, ifl all y our taxable income came from sources that withheld there was a form the size of a punch card that you mailed in along with your withholding slip, and it took less than a minute to complete all the necessary paperwork for filing.
I think in the US, it was just about as easy in the 50s and 60s, although the form was on a fullsized sheet of paper.
Probably took ten minutes.
You do have to attach your 1099 if it shows tax withheld. I think the main purpose of attaching the W-2 is to verify the amount withheld.
The final deadline for the employer to submit your W-2 to the federal government is March 31st, with an automatic 30-day extension available and an additional 30-day extension available with explanation. In addition, Form W-2 does not get filed with the IRS. It get filed with the Social Security Administration (SSA) which then forwards a copy to the IRS. The forwarding step takes some time to work its way through the bureaucratic jungle, although hopefully not as much time as it used to take when most filings were on paper.
A lot of taxpayers would be pretty ticked off if they had to wait until October to get their refunds and interest would need to be paid on those refunds.
You may have noticed that when you filing electronically, you do not have to send in your W-2. I’m just guessing here, but I assume that someone made the decision that the cost-savings and efficiency of electronic filing made up for the risk. But rest assured that a significant number of thieves have noticed that e-filers are essentially on the honor system when it comes to withholding.
No shit? :gaak: I’ve never known either of these two facts. I’ve never gotten shit from the IRS for failing to attach any 1099. (Although I think 2013 is the first time I’ve ever gotten a 1099 that showed any withholding.) And why wouldn’t they want me to attach a 1099, just the same, if I got some income where tax wasn’t withheld? Wouldn’t they be even more interested in seeing that? Either way, taxes withheld or not, they also get the same 1099 from the party that paid me.