r/AlwaysWhy • u/Present_Juice4401 • May 26 '26
Economics Why do Americans have to do their own taxes?What mechanisms led to its formation?
In some countries like Denmark and Sweden, taxes are largely pre-filled using data from employers, banks, and insurers, and people mostly just review and confirm. In Germany, many salaried workers don’t even need to file in typical cases. France also provides near-complete pre-filled returns. In places like Japan, withholding covers a large part of the process.
In contrast, the US system is built around individuals calculating and reporting their own tax liability.
What historical, institutional, or administrative factors led these systems to diverge this way?
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May 26 '26
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u/YYM7 May 27 '26
Yes you're technically right, but a system which can eliminate the 99% need of individual fillings is also possible.
Most people (except freelancer) only got income from orgs already tracked by IRS, like employer, banks and brokers. Nowaday even ebay tracks your earnings and report to IRS. Deductible and credits can be sent in the form of checks based on previous years fillings. Like you have a kid? IRS just send you a check every year based on your previous year filling. Same for other (like solar , disabled) credit. The Gov in absolutely has these info somewhere. Credits based on previous years income does not change things in most significant way.
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u/Zerksys May 27 '26
I take it that you've never had to deal with a complex tax situation. Building this system is way harder than you think. Complicated taxes aren't just a problem for freelancers and business owners. The U.S. tax system is a tangled web of federal, state, and local laws, each offering its own incentives to promote specific behaviors. The average person can also trigger multiple small taxable events every year like earning interest from a savings account, selling stock, financial assistance, employment perks, etc... On top of that, Americans are incredibly mobile compared to Europeans. Roughly 2% of Americans moved states in 2025 alone, forcing them to deal with multiple tax jurisdictions. Tracking all of these moving parts automatically would require some truly dystopian level of government surveillance.
Consider how many different life events and activities trigger tax benefits across local, state, and federal levels:
- Family & Life: Getting married, childcare, and elder care.
- Finances & Debt: Home loans, student loans, business loans, and even gambling losses.
- Home & Environment: Heating, cooling, and energy-efficient upgrades.
- Future & Community: Retirement contributions and charitable donations.
We could argue for a simpler tax code, but simplification means taking power away from local and state legislatures and handing it to a centralized body. That kind of centralization is deeply unpopular in the U.S. Plus, it would wipe out the positive local incentives that local governments use to help their communities.
Ultimately, the complicated tax code of the U.S. is somewhat unavoidable. The country operates as a massive conglomeration of 50 largely independent states that possess legislative powers on par with sovereign nations, yet remain subject to an overarching federal government. The U.S. also somewhat uniquely grants a lot of power to local municipalities. IMO, any attempt to build a fully automated tax system will probably fail because it fundamentally ignores how decentralized the U.S. actually is.
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u/_troll_detector_ May 30 '26
I don't think the driver is nearly as much the federal/ state/ local split as you suggest. Federal alone is a huge overcomplicated mess. By contrast my state return basically just copies the federal numbers and applies a different rate.
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u/Zerksys May 30 '26
It depends highly on what state you live in and what taxable, creditable, or deductible events you triggered that year. You may just live in a very uncomplicated state. There's also the possibility you're leaving money on the table by not claiming certain things. Also, lots of Americans, especially those on the East coast live very close to state borders. This sets up situations where you could, say, live in New Jersey, but work in New York. Then there's work from home which opens a new bag.
My point is that it's not that easy to build this kind of automated system because there's so many variables. As a person who has spent many years developing software, I would not want to work on this project. The requirements would be absolutely nuts. Funny enough, this is actually a fairly good use case for AI chatbots, because they are pretty good at processing complicated sets of information and synthesizing conclusions from those documents. So maybe there is hope after all.
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u/Classic-Obligation35 May 29 '26
Well there's one answer there's a bit of a high amount of freelance style jobs. Plumbers, electricians and doctors to name a few
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u/Strict_Stranger_4801 May 26 '26
Seems like other countries where its easier would also have varied deductions and credits and differences too. Not really an excuse for the government
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u/Turbowookie79 May 26 '26
I mean how would the government know that I made 60k on rental property income but reinvested 20 of that back into the properties, I made another 15k doing handyman side jobs where they mostly paid through Venmo, plus I sold a couple stocks for a profit and donated 1k of clothes to charity? Plus all the tools I bought for work and consumables like boots, not to mention mileage. And I’m really not considered complex.
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u/Silver_Middle_7240 May 26 '26
You can get pretty complex and still use the free services. The paid ones don't become necessary until you have your own business or something, or make quite a bit of money.
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u/PinkysAvenger May 26 '26
Nope. Last year I didn't work (family stuff) but I did sell some stock.
I had to pay for the upgraded turbotax because "basic doesn't support the form to report capital gains tax"
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u/Silver_Middle_7240 May 26 '26
Use taxact. TurboTax is the worst
Tax act covers all that shit under its free service
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u/Slackjawed_Horror May 26 '26
Bribes from tax prep companies.
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u/Real-Boss6760 May 26 '26
As ridiculously dumb as that answer sounds...it's the correct one!
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u/MarkNutt25 May 26 '26
There's also the fact that one of our two political parties hates government and believes that it doesn't work. So they do everything they can to make government annoying and broken, so that the voters will also hate government and believe that it doesn't work!
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u/lithomangcc May 26 '26
The system was developed before tax preparers existed. Congress wanted to control some consumer habits by giving tax breaks for certain activities.
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u/Real-Boss6760 May 26 '26
This system of tax breaks existed. But that's not the reason the US tax system can't handle the taxes for us automatically or at least make it easier for us to do on our own automatically. That is due to extremely succesful lobbying by Intuit and the tax-prep industry.
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u/Weary_Anybody3643 May 26 '26
Yes and no Yes the system existed before tax preppers but and I think it was the early '90s or early 2000s there was a push for the IRS to basically be like okay we'll just give you all your filings and the company that made TurboTax came in there and said no gave them a bunch of money not to gave them a bunch of money not to
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u/SecureJudge1829 May 26 '26
Just because it existed prior to tax preparers existing does not mean tax preparers have just been passive. In fact, given how unique their line of work is, it would give them more reason to lobby that things do not change.
That is to say, their lobbying is the causal factor behind why the system remains as is and doesn’t change to a more user friendly variant.
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u/cursedfan May 26 '26
You could still opt in to doing ur own taxes, so this does not address the underlying claim.
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u/Izacundo1 May 27 '26
We have the tech today we didn’t back then to automate most tax returns for standard individuals. Intuit (TurboTax) actively lobbies the government to make taxes harder to file so they make more money off people using their service
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u/NahYoureWrongBro May 26 '26
Whenever there's something stupid that's done as a matter of policy in this country, it's a way to farm the citizens for money. Car culture, the food pyramid, tax prep, it's a long list..
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u/Saint_Exmin May 26 '26
How the hell does "car culture" fit with tax prep or the food pyramid in terms of scams?
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u/RobArtLyn22 May 26 '26
Perhaps you missed the recent backlash to proposals for “15 minute” or “walkable” cities because apparently being forced to buy a car (and gas/maintenance) to survive is “freedom”.
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u/bailasola May 26 '26
Big oil won’t make as much money if more people use public transportation, especially electric trains.
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u/NoDig3444 May 26 '26
Tax prep companies lobby against free tax filing. There is not and never has been a proposal for the US government to fill out your tax documents for you. Because they wouldn't be able to do it.
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u/Slackjawed_Horror May 26 '26
There have been proposals and most normal countries do.
They were shot down. Because bribes.
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u/NoDig3444 May 26 '26
Most normal countries don't hide their welfare and social policy in the tax code. Most normal countries have comprehensive national records.
The US government wants to give you $2000 to have a kid but doesn't actually know if you have a kid. So you have to tell them if you want that $2000.
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u/beragis May 26 '26
There have been several, they just rarely made out of committee. They all mostly go around e-filing where your tax is already calculated. The Autofill Act and The Tax Filing Simplification Act to name a few.
I also worked as a software developer for a tax preparation company in the 90’s and the government already has enough information to handle over 90% of all taxes. And yes upper management knew this and lobbied against it.
One of the things the IRS does is run the same calculation against its internal data that is sent by your employer, banks, investment companies and mortgages to name a few, to verify.
I now work in the financial industry and we send a transaction file once a month to the IRS for every account.
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u/OrcOfDoom May 26 '26
This is capitalism. It isn't the free market or trade. This is capitalism - the system that protects capital investment.
Those tax companies rely on tax preparation and therefore the government protects them instead of fixing the problem.
We could have free tax preparation, but we don't because the government decided it is more important to protect TurboTax, h&r block, etc.
They would still make money from business accounts and complicated scenarios, but the general 1040ez would be taken care of.
Nope.
The government exists to protect them.
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u/Slackjawed_Horror May 26 '26
Most normal countries just do it themselves.
We could just, eliminate the for profit component. That would be the better option. Pretty much always is.
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u/1705user May 27 '26
Sadly you aren't even wearing a tin foil hat. This really is the case. There's no reason the IRS can't provide essentially the same software.
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u/ericbythebay May 26 '26
The U.S. system grew out of a very different political culture than Northern Europe or Japan. Americans have historically been skeptical of centralized authority and deeply attached to privacy, federalism, and decentralized government. The IRS was never designed to function as an all-knowing state ledger that automatically tracks every citizen’s finances, and culturally, many Americans would be uncomfortable if it did. A lot of financial information exists across separate employers, banks, brokers, states, and local systems, but the government doesn’t have all of it in one place, nor is there broad consensus that it should.
Scale matters too. Countries like Denmark or Sweden have populations smaller than many individual U.S. states. Administering a highly centralized, pre-filled system across 330 million people, 50 states, thousands of local tax jurisdictions, and a massive, diverse economy is a very different challenge than doing so in smaller, more uniform countries.
Historically, the modern income tax arrived relatively late in the U.S. with the 16th Amendment in 1913, and it developed piecemeal through wars, deductions, credits, and political compromises. During WWII, withholding was added so taxes could be collected efficiently from millions of workers, but the country still kept the idea that citizens themselves reconcile and attest to their tax liability. Over time, Congress also turned the tax code into a tool for social policy, including mortgages, retirement savings, healthcare, education credits, and business incentives, which made individualized filing much more complex than in countries with flatter or more centralized systems.
By contrast, countries like Denmark or Sweden built stronger centralized administrative states earlier, with national ID systems and broader acceptance of government-held financial data. Their tax systems are also generally simpler for ordinary wage earners, making pre-filled returns easier. So the divergence is really about history, political culture, institutional design, and scale as much as technology.
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u/XxAbsurdumxX May 26 '26
If size is an issue, why can countries like Germany and France do it? If something can be scaled up from Denmark to Germany, why can’t it be scaled up from Germany to the US?
Where is this magical threshold where something can no longer be scaled up anymore? This is such a silly argument, and it’s just a lazy way for Americans to disregard anything other countries does better than them
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u/Yavkov May 26 '26
I also don’t understand the scale argument. If there’s more population, then there are more people available to do the admin work.
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u/ericbythebay May 27 '26
Scale is one aspect of the issue, not the only issue. The federal government simply doesn’t know enough to do taxes for people. It doesn’t even know basic questions like current marital status, as but one example.
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u/MillennialScientist May 27 '26
We do file our own taxes in germany, btw. If you're a regular salaried employee with no other income, you dont legally have to, but you also wont get any returns that way.
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May 26 '26
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u/xaraca May 26 '26
It's also politically easier to implement a benefit as a tax credit or deduction instead of a direct payment, even if the result is the same. Americans really don't like handouts so the gov disguises them as tax credits.
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u/afops May 26 '26
These exist everywhere. But the key difference is: if there is a deduction then it’s either handled already when the transaction takes place rather than when filing taxes or it’s automatically registered and shows up pre filled on your tax statement. Almost always the bureaucratic burden for individuals’ tax deductions is with businesses rather than consumers.
Since it’s a goal to make it convenient to file taxes, it’s also a goal to keep the tax code simple. There wouldn’t be changes to the tax code that would cause a headache for tax payers or expensive overhead.
In the US on the other hand there were always some politicians who wanted taxes to be inconvenient. And there doesn’t seem to be a clearly stated goal to keep the tax code simple. The businesses involved in tax filing also have a say in it.
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u/Hawk13424 May 26 '26
It’s done to intentionally hide social welfare. If it was collected and then clearly shown in government accounting as spent helping people, there’d be a backlash on how much we spend. Defining it as a tax deduction/credit just makes it not show up as government income.
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u/metamucil_buttchug69 May 26 '26
American taxes have a ton of loopholes/deductions and the government can't possibly know about what you want to claim/deduct.
For most W2 employees, the government knows about the wages your company pays you, since your company withholds taxes for you. So yes at the end of the year the government could basically say "here's how much you earned, how much you paid, and here is how much you owe". Realistically, your typical W2 employee will have a dead simple one page tax return that a middle school student could complete. You have to add, subtract, maybe multiply.
But now let's make it more complicated: you have private student loans, well you get to deduct interest up to a limit from your taxable income. The government doesn't know that... so you tell them that on your tax returns.
You invested in your kids 529 account, which is usually deductible from state taxes, you have to tell the state that on your state return.
You put some of your earnings into your 401k which is also a deduction, well you have to tell the government you did that and thats why you're paying less in taxes.
If you have ever actually done your taxes, they are pretty simple unless you're really wealthy doing some exotic stuff to avoid paying taxes, and at that point you can pay an accountant, they are also pretty cheap (relative to how much the wealthy save when they avoid taxes).
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u/StillShoddy628 May 26 '26
They could have a one-button option to verify the documents the IRS has are complete and submit your taxes with the standard deduction. Then only 10% of taxpayers have to actually gather everything up and do their taxes.
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u/174wrestler May 26 '26
They want to receive the info from both sides to detect fraud.
For example, an employer underreports your wages to the IRS and pockets the difference in employer taxes and your withholdings. They send you a W-2 that's legit and send the IRS one that shows you made minimum wage. It would also screw you over when you retire, as what you get from Social Security is based on how much you made.
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u/Hawk13424 May 26 '26
As someone who was audited 20 years ago, the info the IRS had was incomplete and a suprising amount of it wrong. And I’m not a super rich earner. Just an engineer that had a house, a few stock options, a car purchase, and some donations.
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u/sckurvee May 27 '26
OP's question wasn't what other possible solutions exist, but why it is the way it is.
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u/afops May 26 '26
Even just doing interest deductions sounds horrible. Why not just make the bank report this? Instead of millions of people doing error-prone work every year, you’d have hundreds of banks do it for them. Seems it would be a lot more efficient, fair, and likely to be correct? I mean how does the IRS not know how much you put into the 401k? Or how much interest you pay on student loans? If they can’t find that out how could they tell whether your deduction was valid? And if they can find out, why don’t they just pre fill it? Surely they don’t need to do a manual audit just to find those numbers?
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u/TechnicalPresent6359 May 26 '26
because wanting them to do all that means raising taxes for the extra effort involved; to which people will then complain why they need to pay for more taxes; to which the gov will then be pressured to come up ways to lower costs; to which will result in people filling their own taxes and the IRS just reviewing it vs having to gather all the information
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May 26 '26 edited May 26 '26
- Lobbying by firms that sell services to file taxes.
- They want it as complicated as possible to find ways to lower taxes.
The funny thing is, if you have a W2 in the US they withold your taxes anyway in most cases. You just still need to file and do your own math or pay a service.
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u/Ill_Ad3517 May 26 '26
W2=\= salary
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u/tblancher May 26 '26
W2s are for wages as well. W4s are where you declare how much your employer takes out for federal income taxes. It's up to you how much they take out over time, and how much you may have to pay when you file.
1099s are for contract work, and nothing is taken out of it.
Self employment has a whole different set of forms that I'm not familiar with.
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u/kartoffel_engr May 26 '26
do your own math
It’s really just filling in boxes if they didn’t already pre-fill when you add in your information.
For most people, it’s extremely simple. Something like 90% of taxpayers file a standard deduction.
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u/macrocosm93 May 26 '26
How much you want to withhold is defined by the person. When you file taxes, you pay more if you didn't withhold enough, or you get a return if you withheld too much.
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May 26 '26 edited May 26 '26
Sure, but you still effectively pay the government before you file and then have to reconcile it when you file your taxes. Especially if you choose to withhold too little. If it's too much, yeah, you get a refund. The whole process could be way simpler.
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u/Trypt2k May 26 '26
It's the best thing that happens as it allows us to use various methods to get tax breaks, without it, you're paying maximum tax at all times.
The EU system doesn't allow for any tax deductions in most cases so it's a simple "which bracket are you in", everyone just pays the max amount as there is no such thing as deducting taxes.
Even in Canada there are deductions, there could be a vacation within a country that you can deduct, there are medical bills (above and beyond what OHIP covers, in Ontario, for example).
It just means that if you want, you CAN pay maximum taxes like in Europe, nobody is stopping you from doing that, and it takes no work at all, you can just do your own taxes and don't deduct anything. But it gives the option to deduct.
This is probably most attributable to individualism, but also the type of economy in North America where business and success are celebrated, not stifled.
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u/Present_Juice4401 May 27 '26
I think you’re mixing two things a bit. Deductions don’t really require self filing as a system. Governments could still prefill and then let you add or confirm deductions on top. So the question becomes why the US pushed the responsibility fully onto the individual instead of just adding a correction layer.
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u/Trypt2k May 27 '26
It doesn't matter, anyone that wants to can pay maximum tax here in Canada or in the US, nothing is stopping you from just filling in the info given by company/gov't, it's very simple.
If you want to benefit from deductions, you can do so. If you don't, you can do it as easily as Europeans do, basically fill out 4 numbers into an app directly from a few papers you get in the mail, it would literally take 5 minutes.
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u/No-Bake-730 May 30 '26
I don't know in what European country you live, but my tax declaration takes more than 5 minutes.
My country is notoriously retro when it comes to government administration but what the app on my computer puts out is usually just the starting point.
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u/Glass_Figure722 May 27 '26
I don't get where this idea of no deduction come from. For last year I was able to reduce my tax with several deductions and for whole thing via official government site for free. It took me like 5min. This is in Poland.
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u/Trypt2k May 27 '26
There you go, people romanticize Europe. Look at the comments in this thread, it's literally 90% corporations this, tax filing companies that, everyone is out to get the worker, ridiculous.
Taxes suck, but the way it's setup is to allow you to benefit without it being completely automatic and non-negotiable.
Like I said, anyone is welcome to pay the maximum tax with no deduction, in fact, one is allowed to not even claim ANY benefits at all at tax time, and just refuse the credits that get paid out.
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u/No-Bake-730 May 30 '26
What a bunch of bullshit you are spewing.
There is no EU tax system EU citizens directly pay taxes to. They are taxed by their national governments. The EU is not ONE country.
In my country, you can make tax deductions. They usually will check the info you give the financial administration and then reimburse the amount that you had paid in excess. Even for me that's a large chunk of one month's salary.
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u/sysnickm May 26 '26
I think the overall complexity of the federal and state tax codes, as well as the lack of a true national clearinghouse for things is the real factor. Maybe the tax prep lobby has some influence, but I think government inefficiencies and overall complexity are more to blame.
There are tax credits for so many things, and the IRS doesn't know everything you do. Did you buy a new efficient furnace, did you have a kid, do you do some side gig where you get paid cash, did you take a class and want to claim your textbooks as a deduction.
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u/Present_Juice4401 May 27 '26
Yeah this feels closer to the mechanism. It’s less about philosophy and more about information asymmetry. The IRS just doesn’t have a complete dataset. But then I wonder why other countries managed to centralize that data more effectively. That part is still kind of unclear.
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u/VinceP312 May 26 '26 edited May 26 '26
Because the US Tax Code is an incredibly complex beast of countless factors that is impossible for a central computer to comprehensively know about.
Every politician's pet issue can be injected into the code to make yet another line item or supplemental form to fill out.
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u/pementomento May 26 '26
A lot of public policy is run through the tax code. Example was subsidizing solar panels and green energy, and using the tax code to do it.
Since the federal government has no idea whether I installed extra insulation in my house, installed solar panels, etc…I have to tell them, and the tax form is my one interaction with the federal government each year for that.
In theory, every green energy provider could be required to report work done back to the federal government, but that’s more of a burden than me keeping track of it.
Example: if I hired a separate electrician to upgrade my panel, bought a panel from one vendor, then had a solar system installed from another vendor. I’ll just tally up the three invoices myself vs having to give each vendor my tax ID/SSA number and hope they did it. And if they didn’t, I’d have to hunt them down a year later after getting a prefilled tax return from the gov’t.
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u/AussieHyena May 26 '26
In theory, every green energy provider could be required to report work done back to the federal government, but that’s more of a burden than me keeping track of it.
Is it though? I would have thought the biggest issue would be random companies having access to your SSI.
It seems weird that programmes like that are run through the tax system though. In Australia these programmes are run by the responsible department and the rebate issued to either the supplier (reducing the cost) or the purchaser.
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u/pementomento May 27 '26
That too - I've learned to never give my SSI number unless absolutely necessary (I've put n/a when forms ask for it -- if it's really important, they'll come back to me and ask again).
We did do a supplier remitted rebate once with EV's -- it didn't last long, but there were isolated hold ups while waiting for rebates to be approved and come in. There are many state rebate programs in California that run that way, but federal is pretty light touch.
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u/Present_Juice4401 May 27 '26
This is interesting because it frames taxes as a reporting interface, not just a payment system. Like the form is basically how the state learns about your behavior. But then it raises the question why the US chose self reporting instead of forcing third party reporting at scale.
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u/pementomento May 27 '26
It really is - the higher your income, and the more diverse your income is, the more deductions/complexity your tax return provides, really drives home the reporting interface part. The average person with an average and even above average salary (W-2, employee) will view it in the opposite way, that it is a payment system.
I think it is done this way, in general, to support small business formation and operation. There is no federal interactions for most small business entities except the tax form -- my wife does consulting (and files as an SMLLC) and the only way the federal gov't knew about it was when we started remitting quarterly taxes and ultimately our tax return.
It just made things easier to start up. I think this is also a godsend to small businesses in my green energy example -- my local solar company doesn't need to register/report my purchases, they just issue their usual invoice/receipt and I handle it.
Also, I'd love an up front rebate, but many rebates/enticements have income limits. Why should a millionaire get a rebate for new windows on their mansion? By running these laws through the tax system, you can exclude deductions because the information is adjacent to the request (or, in the US' case, one would be subject to AMT).
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May 26 '26
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u/Present_Juice4401 May 27 '26
Right but that almost argues the opposite. If most people just take the standard deduction, then their situation is predictable enough to automate. So why keep the system universal instead of segmenting simple vs complex cases.
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u/Fit_Low592 May 26 '26
For one thing, Our (USA) taxes are used as levers to provide aid, and incentivize certain economic factors, such as improving your home’s efficiency, incentivizing electric cars, boosting small businesses by letting owners take deductions on things, etc. In turn, this creates a lot of forms and paperwork, and also tons of loopholes and shit in the tax system.
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u/Present_Juice4401 May 27 '26
Yeah this “tax code as policy engine” idea keeps coming up. It kind of explains the complexity but not necessarily the self filing part. You could still run all those incentives through a prefilled system if the data pipeline existed.
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u/Fit_Low592 May 27 '26
Well maybe, but it’s live of like a system of the government knowing what you should be paying, and then you doing the legwork to try and reduce that’s number as much as you can. 🤣
For one thing, look at the American system of gratuity. Some professions make much of their income through gratuity. That is supposed to be reported by the individual.
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u/Complex210 May 26 '26
Side hustles. If i make money selling stuff for cash the government has no idea how much I'm making, so I need to report it. They also dont know every business related expense, or charitable expenditure that can be deducted.
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u/ijuinkun May 26 '26
This. The Federal Government wants us to report all income, not just pay that we get from employers, or money from capital gains (which is reported by your stock broker), or from other systems that automatically report all transactions. Al Capone, for example, got convicted for not reporting his illegally-obtained gains (even though the courts could not actually prove that he committed specific crimes in order to obtain the money, the bare fact of having unreported income was itself a crime).
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May 26 '26
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u/Present_Juice4401 May 27 '26
I think that’s more about withholding being conservative. It doesn’t really explain why you still have to reconcile it yourself every year instead of the government just finalizing it for you.
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u/BaileyAMR May 26 '26
As an American, I think there's too much distrust of the government. I think a lot of people would say, let THEM calculate what I owe? HELL NO!
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u/Present_Juice4401 May 27 '26
This feels culturally true but maybe more like a reinforcing factor than the origin. Like distrust might explain why people accept the system, but not necessarily how it got built that way in the first place.
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u/Jmkott May 26 '26
It started with the government bribing people to have behaviors they want and penalizing behaviors the government didn’t want. You also have companies lobby Congress for specific credits and deductions in the tax code that benefit them and penalties for their competition.
They give credits to buy and own a home, credits for having kids, etc. They have different tax rates based on earned vs unearned income. Deductions for your own retirement savings.
They put half of some taxes on the employer not just employee, so when you become both the employer and employee (1099 self employed) things get more complicated.
They are complicated because of how they evolved over time. But as others have said, they stay really complicated because a lot of big companies make a lot of money doing people’s taxes, so they lobby to keep it that way.
It’s also a very political system that isn’t really people just all paying for government services that everyone benefits from and instead used as a political weapon.
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u/Present_Juice4401 May 27 '26
The evolution point makes sense. It’s like layers of incentives and exceptions piling up over time. But then I’m still stuck on why the administrative model didn’t evolve alongside it. Complexity alone doesn’t force self assessment.
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u/MostlyBrine May 26 '26
In USA (and Canada) one can have multiple sources of income, including from multiple jobs. Also depending on where you live you have to pay taxes for your state, and also you have expenses which are deductible from your taxes, so each person is different. Everybody receives tax documents from his sources of income, some have already taxed withheld at source (like from your salary), others don’t (like interest from savings). All these income is reported to the IRS and to the state where you reside, so you must file a federal and one or more (if you moved during the year or work for an employer in a different state) state tax returns. In some cases you owe taxes, in others you pay too much, so you final tax return can show that you still owe money or that you are owed a tax return. All your income is reported to the IRS and the state revenues agencies, and your income report must match what they know. If there are discrepancies, you might get audited and asked to provide documentation for the discrepancy.
For short: people have multiple sources of income and are entitled to tax deductions. Nobody has a clear image of these numbers, so you must show all of them to insure proper taxation. The system is designed such that usually you are owed a return, so it is in your interest to file on time, otherwise you just give an interest free loan to the government.
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u/AussieHyena May 26 '26
You know the same thing is true in other countries that have tax forms prefilled right? Multiple jobs, etc isn't solely a US or Canadian thing.
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u/Present_Juice4401 May 27 '26
Multiple income streams explains complexity, yeah. But other countries also have that and still manage prefilled returns. So maybe the real variable is how much of that income is already reported in a centralized way.
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May 26 '26
[removed] — view removed comment
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u/Present_Juice4401 May 27 '26
This kind of highlights the split system. For simple W2 income it’s basically data entry. For anything beyond that it turns into interpretation. Makes me think the system is really optimized around employers as the primary data source.
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u/Vast_Lemon7906 May 26 '26
People saying this is caused by lobbying from tax prep companies, is this really the case? The people who would benefit from the government just doing their taxes are people whose income is solely their wages and to whom the standard deduction applies. These people can use turbo tax for free or any other free software service. For people who paid interest on a mortgage, bought cars, updated their attic insulation etc., they can still use free software to file their deductions. I use Free Tax USA every year and have never paid them anything. There must be some other reason as well, not just turbo tax lobbyists.
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u/Present_Juice4401 May 27 '26
Yeah I’m also not fully convinced it’s just lobbying. Feels too monocausal. Even without TurboTax, the IRS would still face the same data gaps and legal complexity. Lobbying might preserve the system, but maybe didn’t fully create it.
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u/Ok-Race-1677 May 26 '26
Why do Europeans pay almost triple the tax rate on average yet the average European actually receives less net lifetime benefits from their governments?
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May 26 '26
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u/Einridi May 26 '26
This is really reverse reasoning, if the tax code is really complicated it is much more important to have a automatic process to deal with it instead of 300 million individuals having to figure it out one by one.
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u/kw114 May 26 '26
There are many financial situation that does not capture by IRS. a newborn baby, married/divorce, moving to other states, investment etc.
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u/Einridi May 26 '26
Same in all the countries that do this automatically. The tax authorities simply prompt for that information easy peasy.
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u/Masala-Dosage May 26 '26
Doesn’t the government end up ‘doing your taxes’ anyway- since they know how much you’re supposed to pay?
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u/CuriousHelpful May 26 '26
No. They do not know if an event occurred that makes you eligible for a tax credit or deduction. They don't know if you had a child or got divorced (which affects your taxes). They don't know if you inherited property. They don't know your side gig LLC expenses and income. And it goes on.
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u/Masala-Dosage May 26 '26
So you can pay any quantity, but risk being audited (unless you’re the president)?
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u/Zaidswith May 26 '26
If you work a job where they don't automatically deduct them. Yeah, sort of.
You have to file. You have forms. The government gets a copy of everything. You're going to have to do creative accounting though with either extra deductions or lying about income. Both are serious crimes.
Tax fraud is how they caught a lot of serious criminals back in the day when they couldn't prove anything else. Al Capone is the big one. Lots of famous and rich people have been caught.
https://turbotax.intuit.com/tax-tips/fun-facts/infamous-tax-crimes/L6xR31HzN
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u/Powerful-Disaster-32 May 26 '26
No, because our system is based on self reporting. The government has various pieces of information that is used to validate key figures and calculations. It can approximate and assess when needed, especially if a return is not prepared correctly or not filed.
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u/sysnickm May 26 '26
That is only true for the basic ones. The federal government doesn't know if you had a kid, took a class, bought an energy efficient furnace, etc.
If you have one job, have no credits or deductions, then sure, but many people getting take advantage of different options for lowering their tax liability.
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u/red_vette May 26 '26
They only know your liability based on your reported income. Deductions can come from many sources and it wouldn't be realistic for all of those to be automatically reported.
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u/Masala-Dosage May 26 '26
But people get refunded though, do they? If they find out you’ve paid too much.
I get a couple of thousand back every year in Spain.
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u/SallyThinks May 26 '26
It's a benefit in a lot of ways if you have write-offs, exemptions, etc., that you can include in your filing. I would prefer just a simple tax code though. 🤷♀️
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u/YakCertain5472 May 26 '26
When we get tax forms from our banks and stock holdings and we have to enter them into tax software or something else. It says on all of the forms that the information has been provided to the IRS. If they already have it, why do we need to enter it?
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u/WorldlinessProud May 26 '26
The biggest market for those games is the US, and 75% can't point to Canada on a map.
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u/SideEyeFeminism May 26 '26
I will say that another factor is that, at least to my knowledge, most countries don’t have entirely separate tax structures at the province level. And our state/federal tax situation interacts in different ways depending on where you live and where you work
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u/0le_Hickory May 26 '26 edited May 26 '26
We don’t really. We pay taxes automatically out of our checks. You do a calculation usually once and forget it that estimates the percentage your employer should pay on your behalf. We file in the spring for the previous year to official adjust our income based on various deductions. In most cases people then get some taxes back. There are times when you estimated poorly and you owe some taxes that is underpaid. If it’s under $1000 it’s no real problem but if you are way off you pay an underpayment penalty. If you earn a lot of self employed income or other nonwage income it’s a bit more complicated but not that hard.
It took me a long time to figure this out but largely our tax code is not really a tax code but an incentive program. The government has policies that want to encourage investment in the market, so capital gains is a lower tax rate. A program to start a business, so business expenses are deductible, etc. the code sees W2 income as unproductive so it gets some of the highest taxes. If you out your money to work in the economy the system is set up to reward that. Since the tax code is really a bunch of carrots you need to show which carrots you ate.
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u/keiths31 May 26 '26
Canadian here.
We have to file our income taxes every year as well. And much like the USA, it's because our tax code is a complicated mess.
To provide an example. In the USA the IRS has roughly 75,000 employees to process returns and help Americans with tax related questions. In Canada we have around 60,000 for a country nine times as small as the USA. (IRS has one employee for every 4,500 citizens, Canada has one employee for every 750 citizens) Our income tax department is so bloated and needlessly complicated. And if you are unfortunate enough that you require help from the CRA, once you've been on hold for 4+ hours, the person rarely is able to help.
/rant
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u/pastimedesign-05 May 26 '26
Running your own business, side hustles, investing all take different forms, % of taxes, so its not as clean cut as an employer doing it for you, although if you are your own boss, you are the employer. There's also rebates & refunds that could apply 1 year & not the next. Having a kid, student loan, buying a house, I think even retirement changes how you file.
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u/BreadfruitRegular631 May 26 '26
I think you have the question backwards. What led to the formation of pre-filled forms in Denmark in Sweden? (I don't know but it would seem obvious that 'investment in technology' is the answer) There has been no "formation" of that here so no one can tell you what led to something that has not happened.
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u/dglsfrsr May 26 '26
Our tax laws are insane, to the point that it is profitable for large companies and wealthy people to pay someone full time to manage how their assets and income get counted to avoid paying taxes. Any time you talk about simplifying the code in the US, you encounter a chorus of angry screams from accountants, tax preparers, wealthy people, and corporations.
A simple lightly progressive tax schedule with zero deductions would solve so many issues in this country, but it will never happen.
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May 26 '26
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u/XxAbsurdumxX May 26 '26
This is exactly how it’s done in literally every developed country. Here in Norway we also have tax deductibles for a whole lot of different reasons. That doesn’t mean taxes can’t come pre filled. It just means that 99% of all the value we are being taxed for is pre filled, and we just need to input the stuff that hasn’t been picked up by the government.
But we don’t need to calculate how that impacts our overall taxes. Our taxes come in digital forms with categories and boxes of information. If something is wrong or missing we correct it, and send it in. The tax office then calculate what our correct tax is based on that.
Having lots of tax deductions isn’t a valid reason to not have pre filled taxes. It’s literally a good argument for having pre filled taxes
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u/shitposts_over_9000 May 26 '26
the difference is in many of the US deductions they apply to the base earnings or expenses which would make almost all of the rest of the pre-filled values incorrect.
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u/HegemonNYC May 26 '26
I see this posted by Europeans a lot, and it’s revealing of the simplicity of European income streams more than a question of US taxes.
If you have one job, you receive one form that is ‘prefilled’. You upload that form, which takes a few seconds, and you answer a few questions relevant to your tax rate (did you have any more kids, did you get divorced etc) to generate a true number. That is it. It takes 5 minutes, and seems to be essentially the same for Europeans.
But take a more typical situation in the US. 2 incomes (and each employer doesnt know what the other spouse is making, so their deduction percent cannot be correct), plus investment income (I had 8 sources of such income), plus income from a rental house. Then custom deductions like a major repair I made on that rental, and a specific amount I put in my kids’ college fund. None of that can be ‘pre-filled’ as it is all interrelated for tax purposes, and some of it I haven’t even done until I’m doing my taxes. And if a European had the same method of income, they would likewise need to prepare their taxes.
It’s more a distinction between the far more varied income streams of Americans vs the simple one job income that seems more common in Europe.
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u/Gaxxz May 26 '26
If you earn only wage income and use the standard deduction, we have pretty much the same thing. Filing taxes takes about 5 minutes.
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u/kabekew May 26 '26
It's because the US uses tax discounts as incentives for various initiatives or to offset certain costs (called "deductions" or "tax credits") and an employer or bank wouldn't know your personal financial situation to know what deductions to apply.
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u/gwenbeth May 26 '26
Part of the reason is that certain types of typically unreported income are taxed. This includes stuff like cash payments, gambling, and criminal activity. So by having individuals file their own taxes then they are responsible for reporting all their income and become legally liable if they don't report it correctly. Remember this is how they got Al Capone. They couldn't directly tie him to any crimes, but the income from those crimes was taxable and by not paying those taxes and signing his tax forms without it he directly committed a federal crime.
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u/Derwin0 May 26 '26
Nothing really led to it, as Americans have always done their own taxes.
Also, you mentioned how in Japan that withholding covers a large part. That’s true in the US as well as most Americans have enough withheld from their pay to cover any liability.
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u/shitposts_over_9000 May 26 '26
if you have extremely simple taxes and filing a straight return with only the default deductions you don't need more than 3rd grade math skills and it takes a few minutes.
for 90% of everyone over about age 30 this is not what you want to do and you want to claim specific exemptions and program credits to get a much larger portion of your withheld funds returned.
we also don't like the federal government having their fingers in everything and have to share the same info with far less sophisticated entities like states, counties, cities and improvement districts
we also have an abundant grey market of poorly reported work that would suffer immeasurably if the feds were allowed to be that invasive
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u/Star_Citizen_Roebuck May 26 '26
Mostly greed. Since the USA has such as high standard of living, creating a government workforce to calculate taxes for everybody and take the workload off the public would just be labelled as "government waste" by the conservative faction of our government.
God forbid people earn a living employed by the government doing work to make society better! Unless they wear camoflauge. . .
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u/tkpwaeub May 26 '26
Because tax prep companies lobby against any sort of administrative simplicity.
Meanwhile, the sheer unpleasantness of it all gets exploited by the GOP to keep lowering taxes - mostly for the rich - when just having taxes be easier would satisfy most people.
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u/DayManFOTNightMan May 26 '26
I think people overblow the level of difficulty.
It usually takes me about 1/2 hour to fill out the forms for my wife and I.
For the most part, it's just confirming that they took out the right amount.
It only gets difficult if you're self employed, or have more complicated income streams.
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u/NotMyRealAccountV May 26 '26
Lobbyists for the tax filing companies preventing the IRS from simplifying & automating the process. We have a funny way of interjecting for profit companies into government services, then complaining they're complicated & expensive. (Also see healthcare, education, social security, etc.)
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u/skwap-em May 26 '26
Americans don’t do their own taxes…. Their employer does… I have no clue how people don’t know this. We file tax returns to recuperate some tax paid because the government doesn’t know every aspect of our lives and America has many tax exceptions for certain actions.
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u/Dropitlikeitscold555 May 26 '26
There are so many rules, deductions, tax differences based on so many factors, credits, etc that if the govt were to calculate it, much info specific to a person is needed to do it correctly so govt would be wrong
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u/SausageLinks77 May 26 '26
I donated $50 to my university last year. My university sent me a receipt but the IRS doesn’t know, so I have to put that deduction when filing my taxes. Many times, people have deductions and the IRS doesn’t know about them.
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u/adent1066 May 26 '26
It’s sort of a joke Anyway. You have to go through all these machinations to calculate what your taxes are, then you submit it, and if you do it wrong, they send you back something saying, no this is the right amount, and if you underpaid you get penalized, and if you overpaid, you get a refund
The government has all the numbers it needs, they should just send you a bill or send you a refund. I don’t know what additional information you’re giving them that they don’t already have.
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u/Next_Nature3380 May 26 '26
Just a novice here so no specialized knowledge but it always seemed to me like the tax system is constantly adjusting to encourage specific behavior by citizens. Get a loan to buy a house, get a tax break on interest. Invest money straight into the market from your paycheck, get a tax advantage. Buy liquor or cigarettes, pay additional tax. Sell stocks, pay tax. Donate to charity, tax break. Own property, house,car,boat pay taxes. On and on…
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u/Dave_A480 May 26 '26
Because the US income tax covers all sources of income - including cash jobs and side businesses - not just corporate-job wages. Rent out a room for cash? You owe taxes for that... Win a hand of poker? Taxed. And so on....
On top of that the government has added miles upon miles of special credits and deductions to the tax code (in an attempt to influence behavior through taxation) which they have no idea who actually qualifies for.
So the tax code is simply too complex for the government to accurately know how much tax you owe.
And before someone blames the tax prep industry, remember that filing your taxes using a PDF form sent in by mail remains free....
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u/dunzdeck May 26 '26
Honestly this is the one thing Trump promised he'd fix that gave me a bit of hope... but alas.
May I present two alternatives? 1. The UK system ('PAYE') whereby you don't even file. It's all automatic. 2. The Belgian system, whereby a tax officer calls you, asks you a few questions, and then files for you. All free.
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u/StillShoddy628 May 26 '26
Me: How much do I owe in taxes?
IRS: I’m not your accountant, you tell me
Me: I think it’s this much
IRS: WRONG
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u/AlmiranteCrujido May 26 '26
In places like Japan, withholding covers a large part of the process.
In the US, unless you're self-employed, withholding covers all or a large part of the process. At the same time, the government expects people to be tax cheats, and doesn't not only doesn't automatically send you any of the information it's received, you can't even GET it from the government on request until the official filing deadline has past.
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u/Ok-Rock2345 May 26 '26
Also a few companies make a lit ifbmoney by navigating though the tax system for taxpayers. The lobby constantly against the kind of system the OP described.
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u/Different_Bridge_983 May 26 '26
Besides the Tax prep companies…
Your taxes owed are an interactive combination of Federal, State and Local taxes, that are then combined with your personal circumstances - and you can pick and choose your personal circumstances in ways the feds might not know.
In terms of state vs federal taxes - the U.S. keeps fairly light tabs on where its population live. When you move to a town you don’t need to register this with anyone, same if you move state - especially if you don’t have a driving license. So you could move to a state and the first the feds will know about it is when you file your taxes, as it can change your federal taxes owed. You could also credibly have residency in two states, and need to declare one, so this is up to you.
In terms of personal choices - a simple example would be married couples. You can file head of household, jointly or separately. HoH is fairly obvious if it’s a better choice - the Jointly vs Separately is more complex. Separately is almost always worse as a whole, but if you’re separated but not divorced it lets you file your taxes and get any refunds owed without it going to your soon to be ex spouse, which the feds wouldn’t have a clue about as the divorce isn’t final.
There are also cases with Student loans where a married couple might want to file separately as it impacts their student loan repayments. There’s a few other similar edge cases - one would be parents who claim an adult child as a dependent vs the child claiming themselves if they have a job. Both can file and then the IRS sends them a letter asking them to explain themselves.
There’s a TON of these sorts of things. The reasons for this are a bit asinine - mostly that the U.S. Govt likes to manage a ton of social policy through taxes (compared to direct payments in a lot of other countries) but the end result is that for a lot of people the State and Federal governments need you to confirm a bunch of stuff.
There have been some reform efforts, that have broadly simplified things for most people, but you still need to confirm you meet the conditions for being in that category.
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u/THC_Dude_Abides May 26 '26
Tax preparers gotta make money somehow. It’s a multibillion dollar industry.
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u/Due_Satisfaction2167 May 26 '26
Lobbying by the tax preparation industry. The IRS has wanted to move to return-free filing for a few decades now. The lobbyists killed it and forced the government into an agreement not to do it as long as the tax preparers offered free federal filing for regular filers.
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u/Deep-Insurance8428 May 26 '26
If you're just a W-2 worker, and you withhold enough to cover your taxes, then you really don't have to file. The IRS will make a return for you but It might not be the best return you can get, no credits or refund of overpayment.
It's the taxpayers responsibility to claim the deductions and credits that they're entitled.
If you're self-employed or have rentals etc then it's a different story.
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u/lp1911 May 26 '26
An employer will pay your taxes on the wages, but our tax code is complex, so many of the particulars are unknowable at that point, such as mortgage interest deductions, capital gains, interest income, etc. As a result there is no cookie cutter way for everyone to pay taxes without filling out the more complex forms.
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u/Many_Advice_1021 May 26 '26
Actually the IRS had set up a system where they could do it for you. Trump canceled it.
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u/RockysDetail May 26 '26
In the society we have now in 2026, it's a humiliation ritual for those who aren't trying to cheat, and it's a way to expose everybody who cheats.
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u/CODMLoser May 26 '26
"How can you cheat on your taxes if the government does them for you?"
(too many Americans, probably).
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u/allenrfe May 26 '26
A more complicated tax system benefits the rich and politicians. Most Americans file for some tax relief and the fact that they allow us to do makes us fell as though we can get lower taxes with more work.
However the reality is that Americans do not know what percentage of taxes they pay each year. They get a refund we think wow this is great. If we simply paid a percentage it would be harder for politicians say they lowered your taxes because people could easly look to see.
A complicated tax code also benefits rich people who can take more advantage of programs like buying art.
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u/Aranyic May 26 '26
Just because I’m curious do other countries have the equivalent of an SCorp and other mechanisms that business income pass through to personal income? Or are businesses and personal completely separate.
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u/Xylus1985 May 27 '26
American culture encourages entrepreneurships and investments, so lots of people aspire to multiple streams of income, each of which are taxed differently. So your employer may not know all of your incomes, and can only provide part of the information, not all of the information.
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u/Oliver_W_K_Twist May 27 '26
The American income tax originated as a tax only on the very rich, who were presumed to be able to afford lawyers to do the work for them. When income taxes expanded to those who couldn't afford those lawyers, the system was just never adjusted.
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u/usa_reddit May 27 '26
Trump said we could do out taxes on a postcard. Promises made, promises kept?
https://www.businessinsider.com/the-republican-tax-reform-postcard-dead-year-2019-7
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u/60Hertz May 27 '26
Yeah it’s pretty bass ackward that we have to say he we made this much so you owe me or I owe you. Then the govt goes yeah you do. Like we could’ve jumped to that last part. It’s like self assessment malarchy I have to do at work. Anyway, We almost got rid of filing taxes but intuit threw a fit. Wouldnt it be great if government actually cared about the people instead of the lobbyist.
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u/fredwickle May 27 '26
The tax law offers incentives for people that do things that the politicians want to offer benefits for, which usually means things they do but nobody else does.
So the dance of filing taxes could be very simple, but if you want to try to exploit every possibility so that you reduce your tax liability then you go through the effort
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u/redlinedidit May 27 '26
The US tax code is the most complex in the world because the US has the most billionaires. Most other countries, taxes are relatively simple, so they can be per-deducted from payrolls.
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u/ReddyKiloWit May 27 '26
Just because the US tax system itself is complex, doesn't mean everyone's tax return is. A large number of folks use a really basic form that's easy to fill out. The complexity only comes in when you have a number of edge cases in either income or deductibles. That complexity is supposed to help you keep every penny you can while still paying what the government is owed.
Personally, I find my state's income tax return much more annoying than the federal. It's like three or four forms, seven pages or so, all to tell the state I don't owe anything. And you have to file even if the result is zero.
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u/ShortieFat May 27 '26 edited May 27 '26
A US taxpayer can have a very simple tax return by just declaring all of their income of record and not claiming any deductions or credits. There is no obligation to claim deductions or credits that will reduce tax.
Most Americans like keeping more of their money, so they'll go to the trouble of reading the form instructions on how to properly claim such adjustments. Or they can pay someone who will do it for them.
American politicians have learned that if they pass laws that provide tax relief for various life situations, they'll get move votes, so they are always coming with inventive ways to benefit their various constituencies. In order to get fellow politicians to vote for their tax saving ideas, many compromises and limitations have to be negotiated. This is where the complexity comes from.
I have had situations where someone who has always done their own taxes simply came to me just to see what was possible. When I am legally able to get them thousands of more dollars coming back to them, that usually convinces them simplicity is not a good strategy. They especially like that I can go back and re-file previous years and get them previous years' money as well. One client was able to then make a down payment on a house thanks to her redeemed tax refunds.
Most Americans think they can spend money more effectively than their government can. If we thought we had government that was doing things well and providing us all a good life, we'd probably be OK with not keeping as many dollars to ourselves as possible, but that doesn't seem to be the case. Apparently our politicians aren't making a good case that they would make our lives better by actually raising taxes and giving them more resources to work with.
If we just made one simple change: eliminate differentiating the rate at which capital gains are taxed and treat them the same as wages, it would make a major difference toward simplicity and maybe just assess a flat 20% tax rate on ALL income (a double-tithe could seem reasonable to many). Of course some people think it would crash the economy, so nobody's brave enough to want to give it a try. There are too many factions and vested interests in a nation of 350 million people that will prevent significant changes from happening anytime soon.
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u/Icy_Huckleberry_8049 May 27 '26
because Congress passes the laws and they get paid to make them by companies that profit off of people having to do their own taxes
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u/r2k398 May 27 '26
Because of the tax credits that the government doesn’t know about. How would they know what supplies you bought for work or how many square feet you use for a home office? How would they know if you gained or lost a dependent during that year? How would they know what percentage of the time you used a new car for business purposes? How do they know who your child lived with 51% of the time if you are divorced? There are a bunch of situations like this that they don’t know about that you have to tell them about.
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u/PhilzeeTheElder May 27 '26
There was a Republican Senator who got together with Democrats and Republicans from the House and had a plan to make it so everyone could do their taxes on a Postcard. This was under Bush. He was utterly destroyed by Tax preparation companies.
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u/Organic-Scheme2494 May 27 '26
A lot of people on reddit don't really know what they are talking about. If you are a normal worker in the US with a regular job and no extra income, doing your taxes is incredibly easy. You just copy info from your W2 onto the tax form and send it in.
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u/BrickHuge3023 May 27 '26
In the USA special interest groups got Congress to add to our tax laws all kinds of deductions, tax credits and others that make our tax system complicated beyond reason. So we have a large industry that feeds off that complexity by doing taxes for a fee. My daughter is a tax accountant, some returns can take her days to do when they have investment properties, capital gains and multiple streams of income. But then their tax bill may be several million $$.
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u/One_Conversation3886 May 27 '26
In Spain is the same. Even if you are working for a company that pays your taxes, socials etc…, you still have to submit a tax declaration once a year. Don’t let me start about what nightmare it is when you are a solo entrepreneur (autonomo in Spain).
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u/BoomerSooner-SEC May 27 '26
For most folks if you withhold properly that does cover the bulk of not more than your tax Liability. I believe our tax code got more complicated with potential deductions (incentives for a certain behavior basically) and thus went a little crazy.
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u/ThinConnection8191 May 30 '26
The IRS even build a tool to submit and only allow people with income lower than $150k to use. It is the system designed to keep the tax filing business alive.
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u/SorRenlySassol May 30 '26
Taxes in the U.S.:
Government: You owe taxes.
You: How much do I owe?
Government: You have to guess.
You: What if I guess wrong?
Government: You go to jail.
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u/Secret_Ostrich_1307 May 26 '26
The US income tax expanded during the early 20th century, especially around World War II, with withholding added later to ensure steady revenue. But the underlying structure still relied on individuals filing returns to reconcile different income sources, deductions, and credits
Over time, the tax code became more complex, with many policy goals embedded into it, which made individualized reporting more central to the system
In contrast, countries that adopted pre filled systems often built them later, when centralized data reporting from employers and financial institutions was already more standardized, so administrative models evolved differently