How come the IRS doesn’t just mail you a bill if they know exactly how much you owe in taxes?
In: Economics
The simple matter is: in the US, changes in the tax code are used to modify citizen behavior.
Want people to buy more houses? Put a tax credit on paid mortgage interest.
Want people to have more kids? Deduction per child dependent.
Want companies to pollute less? Create a tax credit for being clean.
And on and on and on and on… The tax code in the US is the -first- lever politicians pull to enact specific social change.
This seems to be an American thing from what I hear. At least in Hungary, we get an online form on our taxes, mostly you don’t need to change it, then you just confirm it and it’s done.
It’s because they **don’t** know exactly how much you owe in taxes.
Taxes in America are also complicated. There are many ways to pay less taxes, but it depends on your situation. Since the IRS doesn’t know how you live, they don’t know how much you owe.
You can pay less tax if you have children. You can pay less tax if you have a home office for running a small business. You might need to pay more tax if you’ve earned money that nobody told the IRS about.
These are things that you tell the IRS on a document once a year. That document is a tax return.
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