[runako]

I came here to write something along these lines. For the simplest cases, filing is free and really easy now. Everyone who needs TurboTax now would need something roughly as complicated until our entire tax regime is overhauled.

Adding to the types of really common situations where you do have to provide context the IRS doesn't already have:

- side-hustle contracting (IRS doesn't know what expenditures are for the business)

- stock sales (your broker may not know your basis)

- home improvements eligible for tax deductions

- sold a home (IRS won't know your basis or selling price)

- did you move for a job? IRS won't know whether you are eligible for tax deductions.

- crypto gains/losses

- inheritances (basis again)

I'm curious whether other countries have simpler tax codes that permit simpler filing?

[ghaff]

>- stock sales (your broker may not know your basis)

This used to be a real nightmare especially when there were acquisitions in stock, splits, etc. There were a couple times over the years when I just said F' it and put down a reasonable number.

But these days, unless you have some pretty old investments, the brokerages generally track your basis.

[runako]

> the brokerages generally track your basis.

Yes, but IIRC if you transfer investments between brokers you are back to tracking basis yourself (if you're lucky, the new broker will allow you to enter the basis after the transfer).

But agree in the general case that it's not a problem for younger people. (Gen X and older may indeed have some of those pretty old investments lurking in their portfolios.)

[ghaff]

That's not universally the case at least. I transferred some shares a month or so ago (in a horribly manual process I might add) and the cost basis was transferred over.

I fall into the older bucket but I guess my old 401(K) must have had basis added when it merged with an IRA and none of my other investments lack basis information.

[realityking]

Adding a perspective from Germany, where the tax code is definitely not simple, a major difference I see is that filing is optional for the simple cases because you can only ever get money back. There are some default deductibles already applied to your payroll tax so the tax office doesn't have to deal with super small cases. The big advantage is that Joe Average won't risk getting into a lot of trouble for not filing.

Just to illustrate, let's go through your examples and how it'd work in Germany:

> side-hustle contracting (IRS doesn't know what expenditures are for the business)

You'll have to mandatory file income taxes since the income from contracting is not salary and there are no payroll taxes deducted from it. Not sure how common it is in the US but in Germany the vast majority of people don't have side hustles like this (for a variety of reasons; certainly a bad thing)

> stock sales (your broker may not know your basis)

There's a default tax rate on capital gains (25%) with a 800€ allowance. You assign how you want to split the allowance between your various banks and other capital gains generating accounts (you're responsibility to not exceed them) and the banks will report your cap gains with your tax ID to the tax office. If you did pay taxes it's often worth filing to make sure the allowance evens out. Also, if you want to carry forward a loss you have to file (but you got 5 years to do so)

> home improvements eligible for tax deductions

You'll probably want to file but you don't _have to_. You just won't get the deduction.

> sold a home (IRS won't know your basis or selling price)

If it was the home you lived in, you don't have to file (it's tax free). If it was a house you rented you'll have to file but you'll have to do that anyway for the rental income.

> did you move for a job? IRS won't know whether you are eligible for tax deductions.

Same as with the other deductions, it's in your best interest to file but you don't have to. No (legal) consequences if you don't.

> crypto gains/losses

This gets tricky but if you owned the coins for more than a year (to the day) they're tax free and you don't have to report them. But you better have documentation on this if you ever get audited.

> inheritances (basis again)

This one is actually interesting as it's a completely separate tax and thus separate process from income tax. There's an allowance based on your relationship to the deceased (500k€ for spouses, 400k€ for children, etc.), if the inheritance exceeds that you'll get a letter from the tax office asking you to file a declaration for inheritance tax. At that point there's not much software that'll help you and you'll better hire a tax advisor :)

[runako]

Really educational comparison!

It seems the major difference derives from our (American) punitive approach to those who use our meager social safety net.

For example a large swath of Americans earn an income that entitles them to assistance in the form of the Earned Income Tax Credit (EITC). This is (roughly, it depends) available to people who earn < 85% of the median income. But they have to file taxes to get the money they are owed (because we hate the poor in America and this will dissuade them from getting their money). So that's going to be a large set of the country that has to apply or leave money on the table.

For a large set in the middle class, you have to file because you leave money on the table by not claiming deductions.

So even if we weren't all more or less required by law to file, we would mostly have a financial incentives to file anyway.

Oh and anecdotally, side-hustles and second jobs are very common in the US. Poor social safety net, no employment contracts, very low minimum wage, high healthcare costs all doom most Americans to perpetually precarious financial circumstances. So everybody is trying to get a little more so they don't get wiped out.