[jaguar1878]

As others have noted, the IRS doesn't know everything, and some things may be to your advantage to report to them. They could send you a bill and ask you to fix it, but many people wouldn't know where to look to find mistakes.

For example: RSUs and NQSOs (employee stock grants) are in my experience handled extremely poorly by default. If I have RSUs vest when the stock is worth $10 a share, then I pay income tax that year based on income of ($10 x share-count). If I sell those shares later on, my brokerage reports to the IRS either: unknown basis value or $0 basis value. The correct basis value is $10 per share. There's a spot in the tax forms where you can tell the IRS that you have the corrected basis, but if you don't do this, you will pay extra tax, and it's an easy one to miss, especially if you're just importing the 1099-B.

At tax time my brokerage does send me additional forms beyond the 1099-B that include the corrected basis values, so its not that they don't know the right value, they just don't give it to the IRS directly. I assume this is due to IRS/congress rules and not my brokerage being obnoxious.

[tombert]

> As others have noted, the IRS doesn't know everything, and some things may be to your advantage to report to them.

Sure, and I'd be ok with giving people the option to deny the default return and file their own using Intuit or something. For people like me, who don't have the ambition to try and do anything clever with taxes, I'd be ok with the default return that they generate from all the information sent via my employer and banks.

[nimish]

This is how it works in a lot of other countries. You get a pre-filled return and can accept it or file on your own.

[viraptor]

> They could send you a bill and ask you to fix it, but many people wouldn't know where to look to find mistakes.

Then people in that situation can do it from scratch like they're already required to do now. This is really not an issue anywhere else - this change wouldn't make the process harder for anyone.

[KerrAvon]

I also have to deal with the cost basis issue every year, and it’s the biggest headache in the entire process for me and my partner. I don’t understand why the brokerage can’t provide the correct basis directly — it would lead to way fewer mistakes and more accurate returns.

[cptskippy]

> They could send you a bill and ask you to fix it, but many people wouldn't know where to look to find mistakes.

The overwhelming majority of people do not have complicated taxes. That is the exception and as others have pointed out, they could hire an accountant just like they do today.

Having the IRS mail out your bill would eliminate the need for most people to purchase accounting software each year, which is exactly what Intuit doesn't want.

[gautamcgoel]

Wait, do brokerages report stock sales to the IRS?

[junar]

Yes, of course.

> A broker or barter exchange must file Form 1099-B for each person: > For whom the broker has sold (including short sales) stocks, ... etc., for cash

https://www.irs.gov/instructions/i1099b

To elaborate on the GP comment, the issue is not whether the brokerage reports, but how they do it. You generally compute capital gain income as (sale price) - (acquisition price). If you buy a stock on the market and sell it, brokers generally report both sale price and acquisition price to you and the IRS.

But for employee stock compensation, the broker can report sale price without acquisition price to the IRS. If you don't report the acquisition price yourself, the IRS will think that it's 0, and assume your income is much higher than the real value.