Comment by AnotherGoodName
2 days ago
Meanwhile in pretty much all other nations you go online to the free website, see your employer contributions already filled in and acknowledge they are correct for the year, add any extra income, check boxes for relevant deductions and you’re done.
This is true even of some third world countries like Sri Lanka (where I live). There is a web-based system called RAMIS (Revenue Administration Management Information System). Any taxpayer can log in using their tax identification number and file their taxes.
Doesn't America have uniquely complicated tax that requires you to keep all your receipts to claim all sorts of confusing deductions? How can the IRS know what you spent your income on if you don't tell them?
I've had the misfortune of having to fill in a W8-BEN-E form [1] and the first time, I just gave up and refused to work with the client because it was too complicated. The 2nd time, I got an LLM to tell me how to fill it in. Just look at the dense jargon - nonparticipating FFI, deemed-compliant FFI, Restricted distributor, International organiztion (hint, that's the wrong answer), Excepted territory NFFE, Passive NFFE, Direct reporting NFFE. There are 32 of them! What the hell is all that? Well 99% of cases are just one of those buried among the rest but you wouldn't know which without some advice.
[1] https://www.irs.gov/pub/irs-pdf/fw8bene.pdf
For most people, those deductions are less than the "standard" deduction you can take instead. For most of the people who do itemized deductions, it's mostly just your mortgage payment and state taxes, which the IRS already knows about, and maybe charitable donations.
And even if you do have a lot of things to report, why not just report those things directly and let the IRS calculate your taxes, rather than you having to do it, fill out a complicated form, then the IRS does the calculation anyways to make sure you did it right?
The majority of Americans are W2 wage earners that take the standard deduction.
> Just look at the dense jargon ... There are 32 of them! What the hell is all that?
For every form I've ever had to file with the IRS, there's a corresponding set of instructions. Those instructions inevitably have a definitions section and/or define the terms in-line.
The instructions for form W8-BEN-E are at [0]. The definitions section starts at printed page 4 and continues through to printed page 7. Some terms you mentioned (like "Excepted territory NFFE") are not in the definitions section, but are described in their own sections.
I'm definitely not going to claim that it's foolish to consult with a tax lawyer (or similar such thing) when one is significantly uncertain about one's taxes. I'm definitely going to object to your implied claim that the IRS dumps a bunch of jargon on you and leaves you to rely on general-purpose search engines to figure out what the fuck they're talking about.
[0] <https://www.irs.gov/pub/irs-pdf/iw8bene.pdf>
Just follow the instructions? From your linked PDF:
> The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is: Recordkeeping, 12 hr., 40 min.; Learning about the law or the form, 4 hr., 17 min.; Preparing and sending the form, 8 hr., 16 min.
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Yea I did look at the guide but it's a huge amount of work that I wasn't prepared to do just to make a couple of hundred dollars from one client. Imagine you start at the first option:
Nonparticipating FFI. A nonparticipating FFI means an FFI that is not a participating FFI, deemed-compliant FFI, or exempt beneficial owner.
OK, then what's an FFI, a participating FFI, a deemed-compliant FFI, and an exempt beneficial owner? That's 4 other definitions to look up just to learn you should not choose option 1 of 32. If you keep track of this intermediate knowledge, it can help you skip some other options but you have to look ahead and see that possibility and find a way to store all these intermediate conclusions so that when you wake up the next day you haven't forgotten if you're an exempt beneficial owner or not - and by the way, before you even begin, you have to work out if you're a beneficial owner - exempt or not.
Once you've decided you're not an FFI, you look to see if you're a "Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle", which doesn't have a definition in the guide! What now? Try to find it in the Internal Revenue code?
By the way, the one you called out - "Excepted Territory NFFE" doesn't actually have a definition at all in the guide either and it refers you to "Regulations section 1.1472-1(c)(1)(iii)". Maybe if you're clever, you can set aside these difficult ones in case you discover an easy right answer first, but that gets back to designing a system to manage the intermediate knowledge and design your search strategy. Yes, you can do it, but also it's stupidly burdensome.
I highly doubt that it's more complicated than the French or German tax system.
Based on what?
The French tax system is pretty simple. Taxes are high, but simple. The website you use to file your taxes is also pretty simple, and every single field has a button that explains what it is about and in which cases you should write stuff inside.
The only annoying parts are if you have accounts outside of France, you have to declare them. And if you get dividends/capital gains in foreign currencies outside of the EU, you have to calculate yourself how much tax you owe using a bunch of tables per country and currency.
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They make even the simple case more complicated than it needs to be. In these other countries, most people don't need to file anything, it just works with what the state already knows. You don't have to provide a load of supplementary info to get the correct outcome. I can only guess you think this way because you've not done taxes in another country.
For a truly uniquely complicated tax system please move to Germany.
While I fully agree that there are a lot of complicated rules for edge cases, for simple (non self employed) cases it is very straightforward. In fact, you don’t have to do anything at all in many cases and still won’t be screwed over as the German IRS will assume typical deductions. There is an official free filing software and if you spend 20-30 USD a year you’ll get access to super easy to use professional filing software. My situation is more complicated than most and I spend 2hrs a year for my entire family
Why stop there? If you reside in multiple countries, then it really gets fun.
When you say America you certainly mean USA? Or is America a country now?
Technically, America is neither a country nor a continent. But the USA is the only country on either of the continents of the Americas to have the word "America" in its official name. Give the Americans a break.
I think this is a cultural difference around the world. In my county, people call it America. USA sounds a bit wanky or what Americans themselves call it. It doesn't matter because everyone knows what you mean.
It's the only country in Americas that US citizens think is important.
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Hating taxes is an intentional regressive system to ensure its complex and is politically expedient to "cut".
Which is basically how it works here too. If you just have W-2 income from an employer it takes less than 10 minutes to fill out the form. Sure, the system you mention is more convenient, but the difference is minimal.
The IRS already has most of my tax information and knows the tax code. Why must I deal with a third party (and potentially have to pay them) to electronically file my own taxes?
The same reason you pay exorbitant sums for healthcare, education, transport and much more.
The US is not a county optimized to provide quality services inexpensively. It is a business optimized to maximize profits.
You don't have to pay.
https://www.irs.gov/e-file-providers/free-file-fillable-form...
As for "having most of your tax information", they don't. They know your reported income. You see that on your W2s/1099s/etc. What they don't know is whether or not you had a kid this year, or whether you lost a kid this year, whether you got married or divorced, if your spouse is claiming the kids this year or not, the number or amount of your charitable contributions, whether you have deductible mileage expenses, or a million other things.
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When I lived in the US(5 yrs), early 2000s, from my second year onwards, I used to receive a pre-filled 1040NR-EZ with my W2 info already printed/filled-in on it. Typically, I would just add a deduction, and mailed it back. Does that program not exist? Or was it only for NR?
You don't have to do that. There is no such requirement. You can fill out the forms for free.
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The system he mentioned is usually equally simple for self-employed.
When I have had 1099s from consulting work it has also been very easy to file. Not quite as easy as Direct File could make it, but pretty damn easy.
In theory, yes. In practice, no.
Also, Americans have to file both fed and state taxes (with different rules)
> Also, Americans have to file both fed and state taxes (with different rules)
And if that weren't enough, you've go municipal taxes too, in a few places like New York and Detroit.
Lol not really in practice.
Remember, Americans have to file taxes separately to the State and Federal government. The Federal government has little authority to dictate State taxes. The paperwork is in part a coordination problem between the State and Federal governments.
Basic taxes are trivial in the US if you just work to live, it is essentially one page. However, there is an extremely long and fat tail where the government has no way of knowing the correct details to compute your taxes. There are myriad subsidies and offsets that have to be accounted for, many of which depend on what State you live in.
If you earn a lot of money, like the tech people that frequent this website, you are much more likely to find yourself in that fat tail. It can become esoteric quite quickly. The Federal tax code has to accommodate the completely independent tax codes of all 50 States in a reasonable way.
Even so, Direct File was possible.
Until it wasn’t.
It is not that complex. RSU's or options are pretty straightforward.
Deductions can get esoteric if you sold a bunch of stock. Even then, not that bad.
Congratulations on having simple taxes. It can definitely get more complex.
There is a reason Americans spend staggering amounts of time and money on tax preparation. It is simple until it isn’t.
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RSUs are not straightforward: https://news.ycombinator.com/item?id=43676698
And options are worse.
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If they genuinely can't work out what you owe, why bother paying it at all? Shouldn't there be a massive tax evasion problem?
There is actually a pretty massive tax evasion problem. Or at least the IRS is pretty sure there is, but they don’t have the resources to go after even a small fraction of them. The only thing that keeps people honest is the worry that if they lie, the IRS might already know (based on e.g. 1099 reports that go to the IRS), or they’ll get audited (which actually happens very infrequently).