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0 pointsAmezarak6mo ago0 comments

The average HNer, who is fairly literate and well-informed about tax-prep, tends to misunderstand the situation.

Using tax preparation software is the cheap (or free!) alternative to what millions of Americans are doing. It was a change for the better for people who didn't do their own taxes. A regular person's taxes can always be done electronically for free, or if they really want, for $20-$100 through tax prep software.

What millions of Americans do is pay a local accountant hundreds of dollars. The accountant pays himself out of their refund. He is "their guy" who is going to find all the "loopholes" to get them the biggest possible refund. He is also a shield between them and the vengeful and anal IRS that will garnish their paychecks or possibly even imprison them for making mistakes. (This is how the accountants market things, not reality.)

The masses generally don't want to "fix" e-filing/tax prep because a) you can already do it for free if you want to, it just requires a third-party which may be dumb but isn't getting most people fired up or b) they don't care about tax prep software at all because they're using an accountant.

https://www.irs.gov/tax-professionals/return-preparer-office...

There are 800k people out there with Preparer Tax Identification Numbers(PTINs) being paid to file other people's taxes. Looking around for the estimates for the actual stats of the percentages of people supposed to use these preparers varies from 25-55%.

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dpark6mo ago

> The average HNer, who is fairly literate and well-informed about tax-prep, tends to misunderstand the situation.

The fact that TurboTax is cheaper than a local CPA does not change the fact that Intuit actively lobbies to prevent free tax filing.

In a sane world the IRS should send a letter to every tax-paying household in February that says “we owe you X”, “you owe us X”, or “your taxes are complex, please work with a tax specialist”. Also in a sane world this would be free and the government would be incentivized to simplify the tax code so that as many people as possible were in one of the first buckets. In our world the government is aggressively lobbied for complex tax codes and prevention of free tax filing.

> A regular person's taxes can always be done electronically for free, or if they really want, for $20-$100 through tax prep software.

Define “regular”. Per TurboTax, only 37% of people qualify for free filing.

I have never tried to go through the TurboTax free file route but based on my experience with the paid service, I imagine they aggressively upsell free filers with the exact same scare tactics you associate with CPAs.

dmoy6mo ago

I suspect that GP"s "everyone can file free" is talk about Free File Fillable Forms, not TurboTax

Which is free for nearly everyone, but is only marginally better than paper filing your own taxes.

dpark6mo ago

I suspect GP is simply misinformed about the reality of the situation. They also explicitly state “you can already do it for free if you want to, it just requires a third-party”.

They are missing the context that only a fraction of filers are eligible to use free filing and that TurboTax paid something like 140 million to settle claims that they are misleading filers. That suit is why they now admit only 37% of people are even eligible to file for free.

AmezarakOP6mo ago

Free Fillable Forms is free for everyone. It is technically a third party. It’s very simple if you have the average tax filing situation.

There are also other services that provide free efiling regardless of income, it’s not just TurboTax.

At the end of the day, you can always do the paperwork if you really don’t want anyone seeing your taxes and mail it. Could it be better? Oh sure, but it’s difficult for me to feel very passionate about it.

> In a sane world the IRS should send a letter to every tax-paying household in February that says “we owe you X”, “you owe us X”, or

As mentioned in sibling posts, the IRS does NOT have the information it needs to get even close on your taxes. They know your reported income. They do not know your marital status, how you’re going to file, if or how many kids you have and will be filing for, and many other things. These all have MAJOR tax impacts.

An additional factor is state taxes really need to be packaged together with the actual solution.

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bigfishrunning6mo ago

I'd like to defend the notion of using a CPA a bit. I started using one when I became a partner in a passthrough LLC. I was now self-employed and was responsible for paying taxes on the businesses income as well as my own personal income. Filing that first year was incredibly stressful and time consuming, and I came to the conclusion that sometimes the right thing to do is to hire someone who knows what theyre doing.

Your post paints accountants as con-men, swindling people and promising "loopholes". Maybe some are, but they do provide a valuable service, especially if your tax situation is non-trivial.

I would love for the tax code to be simplified enough that I don't feel compelled to hire someone who put in the work to understand it, but that's simply not the case right now.

didgeoridoo6mo ago

I think GP’s point was that the vast majority of individuals have taxes that look like “one W2, maybe a couple 1099s, and standard deduction.” Many of these people have been scared into using a CPA when they really just need to plug-and-chug a few numbers into tax software.

As soon as the words “passthrough LLC” (or “farm” or “S-corp” or “itemize”) are on the table, it’s usually worth it to pay $1,000 for a professional, assuming your time is worth something.

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AmezarakOP6mo ago

I’m talking about people with a couple W2s and maybe a 1099. In your situation hiring a CPA is likely a very reasonable choice.

nsteel6mo ago

Was it always possible to do it for free with third-parties, or did that come about in response to things like free-file?

j / k navigate · click thread line to collapse

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dpark6mo ago

> The average HNer, who is fairly literate and well-informed about tax-prep, tends to misunderstand the situation.

The fact that TurboTax is cheaper than a local CPA does not change the fact that Intuit actively lobbies to prevent free tax filing.

> A regular person's taxes can always be done electronically for free, or if they really want, for $20-$100 through tax prep software.

Define “regular”. Per TurboTax, only 37% of people qualify for free filing.

dmoy6mo ago

I suspect that GP"s "everyone can file free" is talk about Free File Fillable Forms, not TurboTax

Which is free for nearly everyone, but is only marginally better than paper filing your own taxes.

dpark6mo ago

I suspect GP is simply misinformed about the reality of the situation. They also explicitly state “you can already do it for free if you want to, it just requires a third-party”.

AmezarakOP6mo ago

Free Fillable Forms is free for everyone. It is technically a third party. It’s very simple if you have the average tax filing situation.

There are also other services that provide free efiling regardless of income, it’s not just TurboTax.

> In a sane world the IRS should send a letter to every tax-paying household in February that says “we owe you X”, “you owe us X”, or

An additional factor is state taxes really need to be packaged together with the actual solution.

1 more reply

bigfishrunning6mo ago

Your post paints accountants as con-men, swindling people and promising "loopholes". Maybe some are, but they do provide a valuable service, especially if your tax situation is non-trivial.

I would love for the tax code to be simplified enough that I don't feel compelled to hire someone who put in the work to understand it, but that's simply not the case right now.

didgeoridoo6mo ago

1 more reply

AmezarakOP6mo ago

I’m talking about people with a couple W2s and maybe a 1099. In your situation hiring a CPA is likely a very reasonable choice.

nsteel6mo ago

Was it always possible to do it for free with third-parties, or did that come about in response to things like free-file?

j / k navigate · click thread line to collapse