As another data point, I also pay $2k - $3k / year for help to file taxes in Japan. But I also know many people who just do it themselves.
My justifications for paying:
- We've done the return ourselves once, but it was stressful to worry about not completely understanding everything and making some expensive mistake.
- Service in English.
- If tax officials ever wanted to ask me something, they would get responses in Japanese from a person who actually knows what they are talking about.
- Nice for making sure I get every deduction.
- Probably just doing the "blue form" return is already worth the expense because of deduction benefits. I probably wouldn't ever get around to figuring out how to do that.
The process in Japan seems reasonable, but seems to me more convoluted than in Finland. I was particularly surprised how you have to pay many different fees which in Finland would have been bundled together. Namely having separate bills coming on varying payment schedules for income tax, municipal tax, entrepreneur tax (5%) and health insurance. This seems inefficient and confusing to me.
> I was particularly surprised how you have to pay many different fees which in Finland would have been bundled together. Namely having separate bills coming on varying payment schedules for income tax, municipal tax, entrepreneur tax (5%) and health insurance. This seems inefficient and confusing to me.
That's how it is in most countries because they're all different entities collecting.
> That's how it is in most countries because they're all different entities collecting.
Exactly. I pay city, state, and federal income tax in the US. My city is about 1.5 times the population of Finland, and that's only one of the three different forms of income tax I have to pay. At least that goes through the state, so it's only two departments, but that's again separate from the federal IRS. And that's just income tax, not other taxes I have to account for and pay as well.
The reason it's more complicated in countries like the US, Japan, India, etc. is because they're much, much larger, which requires more complexity to manage - both the size of the government itself and the revenue-collecting departments that need to support it.
If I only had to pay taxes to my city's revenue department and there were no state or federal tax in the US, I can guarantee that the process would be a lot smoother for me as well.
In Poland municipal, state and federal income taxes are paid as a single entry on the tax form. The government then transfers the money to the appropriate lower level of authorities.
So I wouldn't say that most countries differentiate like in the states.
As an additional data point: provincial income taxes in Canada are collected along with federal income taxes by Revenue Canada and then remitted down to the provinces. The sole exception to this being Quebec.
Definitely a peculiarity of the US system being less cohesive than some other countries - and also dealing with far more people and jurisdictions.
Also, I don't think that the size of the country (I think you mean the population, Finland has larger area than Japan), but the amount of bureaucracy given state likes and population is able to handle.
Actually the more population the harder it is keep the different taxes, it would be easier to have a single one and distribute it accordingly from the top.
Side note... when you say your city is 1.5 times the population of Finland, are you referring to the only city in the US with a larger population than Finland?
I pay very close to that for our US taxes. We have to file 5 federal returns and one state return: an MFJ 1040 with supporting schedules (A, C, and D primarily), 2 kiddie returns, 2 gift tax returns, and a state return. Throughout the year, we file quarterly estimated taxes and 4868s.
Our total filing packet runs to nearly 100 pages and our annual bill is between $1800 and $2500, depending on the exact complexity, whether we have any amended filings to make, etc.
I DIY'd my taxes for many years, and once the kids came and brought the additional complexity (some of which is cyclic), I tried a professional one year. Literally in the first year, he looked over my prior DIY'd returns [that I was certain I'd done correctly] and found an error in one year where I'd overpaid $29K by miscalculating the basis of some employee RSUs and it was still within the statute of limitations where I could amend that year. He saved me 10 years' worth of his fees before he'd filed my first full year of taxes.
He didn't say arithmetic error, he said miscalculated basis. Very different.
Here's how it happens to lots of people.
1. Vest RSUs worth $25k-500k, depending on how senior you are and what BigCo you work for
2. Employer sells 40% of your shares instantly upon vesting, for taxes
3. Employer remits that 40% to the government
4. You sell all your shares, because you realize concentrating your risk of investment loss with the risk of unemployment is a bad idea. Basis should be approximately 60% of that year's vesting
5. Employer correctly reports the full pre-tax vested RSU value as income on your W2
6. Broker, for incredibly Byzantine and unfortunate legal reasons, reports basis of vested-then-sold stock as zero
If you miss step 6. when filing your taxes and just naively enter the numbers your broker gives you in your tax forms, you will be double taxed, capital gains on the full value of your sale, instead of ~$0 gain for your vested-then-sold stock. Your employer already covered that income on your W2.
So, sokoloff may have just inappropriately paid capital gains on a $300k vest. Sizable, but fairly normal for a high performing senior engineer or manager at a BigCo.
Alternatively, the same logic applies (and it's even easier to screw up) if you held on to your shares from multiple years of vesting, and sold them all at once, so the original grants may have been smaller. If they appreciated, you owe tax on the adjusted basis, not the zero basis reported by the broker.
Side note: you need to check this particular failure even if you take your return to a place like H&R Block. H&R Block specifically has repeatedly screwed this up for many different coworkers of mine. And then they didn't help with the necessary amended return. Stear clear of H&R Block.
That's exactly the mechanism of my error, although I seem to recall the amount in question was more like $125-150K of basis miscalculated. (I crisply recall that it was a $29K refund from the amendment.) That did represent multiple years of vested RSUs which I sold all in one year to make the downpayment on our house; some of them I had filed as short-term gains, others as long-term gains, all against a $0 basis.
A $29K error would be over $200K of pre-tax RSUs. I had to work it out in Sheets to be sure as the number was higher than I thought (and definitely in the ballpark of your figure, so this is a "you're right" reply not a "no, but" reply.
I assumed in Sheets (arbitrarily) one grant, 10% CAGR on share price, annual vesting, and selling the whole grant in year 4 (so years 1-3 growth are LTCG and year 4 is no growth after vest).
Well it could be that my accountants just totally lucked out and presented a proposal to someone whose motto is Charge More For Professional Services, but it's mostly "I have a number of factors which make writing my tax return complicated", many alluded to here: https://news.ycombinator.com/item?id=10810367
I paid just shy of $3k for tax prep last year. The package of information that I sent to the IRS was more than 50 pages of documentation. I joke with friends that you'd think I was an international oil baron but in my mind I'm a pretty regular person.
Judging from Patio11's writing I would guess that his situation is similar to mine (though he seems more confident in grocking IRS rules and doing his own accounting and taxation than me). Here are a few of the complicating factors that make me want to pay to make the problem go away instead of reading IRS documentation for literal weeks to learn how to do it properly:
* Income in two countries.
* Tax treaty between those two countries.
* RSUs from two companies.
* Options from one company.
* Difference between what stock events are taxable in the two countries.
* 401k and similar account in other country.
* Vanguard ETFs with some sells for loss harvesting purposes.
* Running a company into which I've put some personal cash.
I did my taxes myself using Turbo Tax for around $60/year for years. Until suddenly I didn't and started paying what seems like a lot of money. Once you leave W-2 land, things get complicated more quickly that seems reasonable.
I paid $2k for US/UK taxes when I moved to London. I had always done it myself up to that point, including freelance Schedule C work, I definitely knew my way around the US tax code.
But then I move to the UK which has a different tax year, with a lot of subtleties over where my money was physically located, and what kind of expenses I could claim, and it got crazy complicated crazy fast. Paying $2k probably saved me $10k/year.
I'm with you here. I never spent more than $600 having a few W2s, some 1099s, the usual interest-bearing accounts, a C corp and a schedule C.
Granted, I could have spent a LOT more if I didn't keep track of everything (i.e. needing a bookkeeping service too). Maybe that's where the additional expense came in.
1120S? $1500 is a reasonable price once you accept the world of asinine information returns costing this much to prepare and file.
For a simple schedule C, $200 is suspiciously cheap but I hear this all the time, even from people with rental property and I'm like - ok whatever good luck with that. If you go to H&R Block for a simple schedule C, of course they do the whole return and it's a charge per return. I think it's about $500-$600 for a 1040 that also includes A, B, C, D, E and SE, last time I had it done. These days I'm just using TurboTax with numbers plugged in from accounting software.
