Why Does Filing Your Taxes Suck in the US?

If you’re American you’ve probably seen the memes about filing taxes. You know the ones. Government says you owe them money, but it’s a secret amount. Except if you get it wrong you go to jail. Also if you’re rich the secret tax number is zero. But for those procrastinating on their taxes and freaking out about the secret number right about now, why does filing your taxes suck?

It’s By Design

American taxpayers spent 17 hours on average preparing their returns in 2017. That number has gone down a bit to 12, but that’s still a lot more than any one of us would like it to be. Especially when there are a lot of hoops you have to go through if you want to file your own taxes, and all the random inconsequential garbage the IRS wants you, (probably) a normal working person to keep track of. 

Seriously, the IRS wants us to report Venmo (or other cash app) transactions over $600 now. Except when the Pentagon got audited they just… lost track of $220 billion in equipment given to contractors. This is not a new phenomenon either. Just to put that in perspective, there are about 336 million Americans. If every single American lost track of $600 in Venmo transactions that’s only $201.6 billion dollars. 

Also the IRS Hates You. Yes, You. 

Here’s the other thing. If you’re not a millionaire, the stakes of filing your taxes are also a lot higher. In 2013, the IRS audited the returns of about 41,000 millionaires. This number fell to 11,300 millionaire audits in 2020. Of American taxpayers, the IRS consistently targets low-income earners who claim earned income tax credit. These Americans are over five times more likely to be audited than anyone else. Compound this with how the wealthy among us pay proportionally (and also literally) a lot less in taxes. This is in part a byproduct of how once you’re rich enough to have assets that aren’t just money, more of the “value” of your stuff becomes an unrealized gain (this is mostly like stock portfolios and stuff). This just means your stuff isn’t very valuable right now, but it could be worth a lot of cash if you sold it. These kinds of gains aren’t effectively taxed in the same way your income is. 

Also Congress cut corporate tax rates by like half in 2017. You know, because Google definitely needs to pay less in taxes. 

But don’t take it from us, take it from the IRS. You are more likely to be audited if you make $20k per year than if you make $400k per year. Why? It’s too hard. No really, it’s simply too expensive to audit the wealthy, as there are more assets to sift through and it often requires more man-hours from more experienced auditors. It’s not an efficient use of their resources, which they don’t have much to spare because, as we know, the IRS is consistently kneecapped when it comes to its budget. 

Also, TurboTax Hates You Too. Yes, You. 

But you probably think filing your taxes sucks because it’s a logistical pain in the butt, and knowing that it’s a logistical pain in the butt because you’re not Elon Musk is not at all helpful. 

If you’re reading this post, there’s a pretty good chance you use something like TurboTax. You know, the software that helps you file your taxes and whose parent company (Intuit) is worth like $125 billion. We’re going to use them as the example because they’re one of the most well-known.

TurboTax likes to advertise itself as a free option, except they trick a lot of people into paying—despite the fact that it’s supposed to be free if you are lower income. In 2023, that’s supposed to be less than $73k yearly. It’s actually not possible to get to the free TurboTax program from the TurboTax website. Their free package also doesn’t cover unemployment (neither does it cover childcare, student loan interest, or tuition according to them), which is like saying you owe money because you… Don’t have enough money. Oh wait, that’s called an overdraft fee. TurboTax even uses a “military discount” to trick troops into paying to file their taxes. 

Spend any amount of time poking around TurboTax, and you’ll find out just how quickly they push you away from their free options to funnel you into spending money—again, even if you qualify for getting this stuff for free. These tactics are pretty common by the way. The burying of the thing you want (like a free service) so you settle for something else you don’t really want (like a paid version of the same thing) is called a “dark pattern.” Yes, TurboTax has been sued for this before. 

Why Are Things Like This?

If you’ve made it this far, you probably have figured it out by now. Things are like this because screw you, what are you going to do about it? Complain and wish the US were like many other similarly wealthy countries that made tax filing simple and free, probably. Like a return-free filing policy, where the government says “we think you owe us this much” and then it’s done. 

But here’s the thing. That actually almost happened in 2002. Except Intuit (TurboTax’s parents) and companies like Intuit realized that if tax filing was free their business would die. The IRS and companies came to an agreement, then. The IRS wouldn’t provide a free service, instead companies like Intuit would provide the free service instead. Then instead of advertising the free service we get… Trying to navigate TurboTax’s website. Intuit likes it this way; they spent over $3.5 million lobbying the federal government in 2022. 

But they had to make the free one! Want to know how to use TurboTax’s free tax-filing program if you qualify? It’s not through TurboTax.com. No. It’s through freefile.intuit.com. Even there, by the way, they still try to direct you to TurboTax-not-free-editions. It’s also not called “TurboTax Free Edition,” it’s the “IRS Free File Program (delivered by TurboTax).” Easy to confuse, that’s the point.

This stuff works too, 70% of taxpayers were eligible for the IRS’s Free File program in 2022, but only 2% made use of it. Remember, you automatically qualify if you make less than $73k per year. You might even qualify if you make more!

We’ve already linked it a couple times already, but here it is with a big signpost. This will take you to the IRS’s Free File on their website. 

See if you know which states don’t do sales tax here.