Why I don’t file my taxes electronically


The deadline for filing taxes is April 17 and so I mailed in my tax returns over the weekend. Yes, I still send in paper returns via snail mail. It is not that I am a Luddite, not entirely anyway. In fact, I wrote my own spreadsheet for taxes many years ago that I update each year to accommodate any changes. All I have to do is input the data and it calculates my federal, state, and local taxes in exactly the same format as the tax forms. I then download the fillable pdf forms from the various government websites and copy the figures from my spreadsheet onto the forms.

So why be a semi-Luddite? Why not go full electronic? It is because I am annoyed that the government gave private companies the right to charge most people to file electronically rather than provide free software. The government saves money by having people file electronically. They could have easily created a system where people could file directly with the government. Instead, they deliberately chose to not do so and created an unnecessarily layer of bureaucracy by artificially providing a role for for-profit private companies, analogous to the way that for-profit private health insurance companies were inserted into the health system where they play no beneficial role but are merely parasites. I did not see why I should be forced to give money to a private company in order to transact business with the government.

I also did not like the idea of giving my personal information to a private company and in this respect, a news report in the Plain Dealer yesterday suggests that my concerns are justified.

If you’re filing your income tax electronically this year, don’t be surprised if someone solicits you for a high-interest personal loan.

Or offers to refinance your mortgage. Or calls about some hot new investment.

It’s because you don’t make much money, you deducted mortgage interest or you had a boatload of income from capital gains.

How did they know?

Your tax preparation program gave you away. Many software companies share your data with affiliates or marketing partners — your name, address, email address, phone number, income, dependents, charitable contributions and deductions for college tuition, business losses or whatever.

The article says that the privacy clauses in many of these sites are long or hidden away or obscure and so people are unwittingly sharing their information. So people who use tax filing software may be actually paying for the ‘privilege’ of having their confidential information sold to other companies.

Comments

  1. says

    I do the same as you for the same reason. On the other hand, I do file my Ohio income tax electronically, because the state is the one that runs that software (and doesn’t charge, either). It is actually very well run.

  2. unbound says

    The primary concern that the IRS has trying to provide free filing is that it would create a government subsidized program that would offer for free what several companies provide in a “competitive” environment (how competitive is subject to debate). Of course, Intuit (primarily) does everything it can to keep IRS worried about potential lawsuits if the federal government enters this market; they lobby pretty heavy at both the state and federal government levels. Once again, corporations making a mess of everything.

    The best I’ve been able to see so far is the offering of free tax filing for low income people (FreeFile and Free Fillable Forms programs at http://www.irs.gov) which are still provided by the same suspects (Intuit, HR Block, etc), so I’m sure they harass people for silly things to get some money out of them.

    Overall, I do agree, but I just wanted to point out some additional information.

  3. Paul Neubauer says

    I do the same thing, and again, for pretty much the same reasons. I also find the practice annoying. For the past couple of years, I, like Ahcuah, filed my state taxes online, but unlike Ohio, Indiana (where I am) just moved over to using private companies instead of running it themselves, so I went back to sending the state taxes on paper. 🙁

    Paul

  4. Trebuchet says

    The Feds used to have a thing called form 1040PC — a one-page, machine readable return. It was available as a print option from TurboTax and I liked that. It doesn’t seem to be around any more so I’ve given up and do the E-file. I did make a point, when I did it yesterday, of being on a wired internet connection rather than WiFi.

    I’ve got a couple of complications in my taxes that made it impractical for me to use a spreadsheet years ago, although I used to do that.

  5. Physicalist says

    I would file a paper return if it weren’t for state taxes. The Massachusetts forms are so long (and such a pain) that I find it well worth it to have a program transfer everything from my 1040 and automatically fill it all in.

    It does bug me that when I file electronically, TurboTax wants to charge me some outrageous fee (was it $4 + 3%?) to use a credit card. And then if I pay from my bank account I have to give the Treasury Department unlimited and indefinite access to my checking account.

    I take it that’s standard for debit transactions, but it can bite you in the behind. When I was younger and living hand-to-mouth, Sallie Mae decided it was going to start automatically deducting student loan payments even though they were still in deferral. Checks started bouncing, fees started mounting, and it got to be a very expensive very unpleasant nightmare.

    Of course, I could opt to mail a check instead (or contact the Treasury and tell them I don’t want them to have access to my checking account any more). Selling my privacy for convenience. I guess that makes me a real American after all.

  6. Reginald Selkirk says

    I appreciate your reasons. For the federal, I used “free file fillable forms,” which are web forms straight from the IRS.

    Everyone is eligible to use Free File Fillable Forms, which are online versions of our paper forms designed for people comfortable preparing their own tax returns. This option does not offer state tax returns and performs only basic calculations.

    This works for me, my taxes are fairly uncomplicated. I set up a disposable e-mail address just for the purpose, and have received no spam.
    .
    My state does not yet have a web form. They offer free e-filing with commercial software for people under X dollars, which cutoff I missed. So I downloaded the PDF forms, filled them in, printed them out and mailed them, like you did.

  7. itzac says

    So I’m of two minds about this. It should be possible to fill out the forms and submit them electronically for free. In Canada right now, it’s not. We have the same “free” services for students and low income filers.

    But I also have no problem with a business providing a product that adds extra advice and guidance for a fee.

    The one Canada has gotten right is that you can pay your taxes the same way you pay a bill online, so no need to authorize the government to debit anything from you account.

  8. Jared A says

    I want to think so more about this idea that companies might sue the IRS for providing a a service for free that they charge you for.

    This implies that the government is under an obligation to make sure that filing taxes is complicated enough that you might need a professional to help. Perverse.

  9. itzac says

    It’s also unclear to me why the government is under any obligation to ensure that a given business is profitable? You also see this in cases where municipalities want to provide free/cheap wifi to their citizens.

  10. Mano Singham says

    I don’t really buy the argument that the tax prep companies could sue the government for taking away their business. Providing electronic tax submission software is simply part of the service government is proving for people doing business directly with it as part of an essential function of government. It is not like the government is going into the banking business or something extraneous.

    If the tax prep companies can sue the government for proving this service, why can’t call center operators say that they have the right to run the IRS help desk or private printing companies say that they should have the right to print the tax forms?

  11. EricJuve says

    I think that for a large majority of filers the IRS already has all their data. The IRS should be able to simply mail an already filled out form as a bill. The filer would then either agree and sign the forms an send them back, or if the filer disagreed could correct the form to their satisfaction then send it back. I have on more than one occasion made a minor mistake on one of my forms and had the IRS correct it.

  12. 'Tis Himself says

    Connecticut also has free online tax filing. The forms are straightforward and clicking on a specific line brings up help for that line. Plus there’s a phone number if you need more help.

    I also file my federal taxes by snail mail. Only I don’t wait until the last minute. I filed in February after I got all the data (W2s, 1099s, etc.) I needed to calculate my taxes.

  13. says

    Solution: DON’T use your regular checking account. Set up another account, at different bank, not just a different office of the same bank, deposit there your estimate of the taxes due plus a bit over for slop, and send the Feds THAT account information. This way they can get the money owed without your running any risk…

  14. unbound says

    I will see if I can hunt down the relevant documentation on the subject. California was either sued or threatened with a lawsuit over their state offering (free electronic filing) a good 5+ years ago. This caused a lot of caution from within the IRS to pursue options to provide filing services.

    The compromise reached at this point is providing services for lower income people for free. This allows for people (at that lower income) to file for free while preventing the government for offering a free service to all in a competitive market (the fact that it is taxes is irrelevant).

    Actually, some call center functions are not actually within the IRS. The only call center functions that are required to be provided directly by the IRS are those that provide definitive tax answers (authoritative answers). However, support for things such as web site navigation can (and I’m pretty sure are) provided by contractors based on competitive bids to provide that service. Similarly, printing companies can (and possibly do) provide the printing services for the forms…the only requirement is that the IRS design the forms since (similar to the help desk) they are providing the authoritative answer on what needs to be on the form.

    BTW, the Free File Fillable Forms are not actually hosted / directly provided by the IRS. That was another deal with the Intuit, et al to provide that service for lower income taxpayers.

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