Imagine you’re a pig farmer.  You raise your pigs in hopes of selling them at market for a profit.  You feed them, water them, make sure they have all their vet needs taken care of, and you weigh them once a week to see how they’re progressing.

Your scales are electronic, and they also send the weights to your local auction house, so they also know how much your pigs weigh.  This auction house also offers incentives, such as bonuses for using organic feed, free-ranging your stock, and other things that you have to keep track of.  You have to report these things to the market as well, so they’ll know what you’re doing (and can apply their advertised incentives).

On auction day, you weigh your pigs one last time and send them off, waiting to get paid from the auction house.  However, if your reporting weight and other incentives don’t match what they have recorded at the market, they will penalize you – and take away money from your final check at settlement.  Ohh, I almost forgot, if you think their figures are wrong, YOU have to prove it, not the auction house.

It seems like a lot of work, right?  You are both keeping the records, but if your figures don’t match what the auction house says, suddenly you’ve got a big problem on your hands.  If the market has all of the information, why don’t they just weigh the pigs, apply the incentives, and then tell you what you’ll be getting on the settlement check?

If the above scenario sounds idiotic, well buckle up – I’ve just described how the U.S. federal income tax system works.

The Feds know what you make (as it’s reported to them every year).  They also know the interest you receive, your investment income, and what deductions you qualify for.  In most cases, they KNOW what you owe (or are due in refunds), but they still expect you to do all of the math and tell them what you think you owe (or are due).  If your figures are correct?  Congratulations.  Here’s your refund check (or you can cut Uncle Sam one for what you still owe) and that’s that.  If you’re wrong?  Hello audit.  Hello fines and penalties.  Hello headaches.

Other countries don’t follow this system. In many places in Europe and other parts of the globe, the central government issues each citizen an annual estimated tax filing, stating their earnings, deductions, etc.  Each year, folks find out if they’re going to get a refund – or if they need to pay – all by a simple form sent to their homes.  Citizens can even dispute the results (if they think it’s incorrect).

So why do Americans waste thousands of man-hours every year, updating software or slumped over calculators and pouring over receipts, trying to ensure that every tax rule is followed and every correct form filled out?

The answer is what you think it is.

Money.

Lobbyists for the big tax preparers (like H&R Block, TurboTax, etc.) spend millions of dollars every year derailing any effort to simplify the overall tax preparation process, so that they can reap billions off of the American public to use their tools and experts in order to “help” them properly fill out all of the forms that make-up the minefield that is the U.S. tax system.[1]

Someone’s getting rich – it’s just not you.  In the words of ‘Gordon Gecko’, “greed is good.”

Believe me, with their outdated software, staffing shortages, and workload backlog, I’m sure that even the Internal Revenue Service would welcome the chance to eliminate most of this mess.

Remember that this year when you grit your teeth as you carefully print numbers into your 1040 or are applying the latest software updates to your tax preparation software.

Then go outside and shout into the wind.

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[1] Online article, “Only in America is Filing Taxes Such a Complicated Mess.  Here’s How Other Countries Do it Better”, Businessinsider.com, published 8/14/21, accessed 2/3/22, https://www.businessinsider.com/filing-taxes-america-system-how-other-countries-do-better-2021-8