May I ask examples of things that you are not confident sharing with the IRS, that you do not have the obligation to share with the IRS, and that can affect the taxes you owe? In my (foreign) mind, whatever might affect your obligation final number you are legally required to do so (either preemptively or when asked), so I don't fully understand.
Many things that I tell my preparer are needed later, but not now. (Tax basis for RSUs that vested. Value of capital improvements to my property.)
Other things are needed only if we elect to method A of calculation, but not if we use method B of calculation. So I give him all the data; he computes my obligations using method A and method B, chooses the better option, and reports only the data needed to support that method's calculations.
I pay my preparer to be an expert in tax code, to represent me in any audits, and incidentally to prepare my return correctly.
Part of that expertise is that I don't have to be an expert, so I tell him everything and he politely rolls his eyes and smiles when I dump irrelevant things on his desk.
You are making an argument for a simplified tax code and reporting system.
The not needed now but maybe later financials should already be reported by the financial institution to the tax agencies.
There should not exist a system where there is a method A, B or C and if you have thousands of dollars a tax accountant can find all the loop holes to make you pay the least. You should just pay what is owed, not more or less.
You wouldn't pay for tax preparation if the potential savings weren't more than what you pay him. With a simplified system there also wouldn't be much need for the audit help you are usually offered when using their assistant
Then let the government distribute this hypothetical preparation software as free software. It could therefore be verified that you're not telling the state more than you want them to know.
A tax preparer could presumably still help you make the decision about what information to share with the IRS. I guess they would be something else, but you get the point.
But if it is irrelevant why do you fear that you will need to provide it? I’m honestly at a loss. Do you mean something such as to whom do you send wire transfers, or which specific companies you have on your portfolio? Or more like having an account together with someone? Something else?
Why would I want to give private data which is irrelevant to the IRS to the IRS? I'm honestly at a loss as to why you think that position is unreasonable.
My data is my data. I truthfully and completely provide to people, companies, and government agencies who have a need to hold or process only that data is required.
I also have a group of advisors whom I trust entirely and I share data more openly so they can help me plan and execute better.
What specific positions (or even total account value) I hold in my various accounts is not required for the IRS to compute my taxes. My advisors on the other hand I willingly give that information so they can give me better advice/guidance.
My tax preparer knows what is required for the IRS and ensures they get that correctl, completely, and precisely nothing more. There's no way the IRS could find all the data that's relevant to my taxes without getting any not relevant data without some expert actor doing that filtering (and from a comparative advantage perspective, I want to pay someone more expert than me to do that)
> What specific positions (or even total account value) I hold in my various accounts is not required for the IRS to compute my taxes.
How can they compute your financial gains without knowing your portfolio changes? (sorry I'm not american and thus my preconceptions of how do you do taxes are weird for you).
I have always been troubled ever since I started receiving RSUs that the IRS doesn't already have access to the cost basis for vested RSUs, and I'm baffled that you wouldn't want them to have that information.
Fair point. I'd be somewhat comfortable with sharing that information earlier than they strictly require it.
But I think a better solution to the very real problem you've identified would be for your stock plan administrator to hold that information and transmit it to the IRS as basis information just like your retail broker now transmits basis for closed positions on a 1099-B, but only transmit it in the year the closing transaction happens.
If I vest RSUs this year and sell them in 2026, the IRS needs to know that basis in 2026, but they don't need to know it now (other than as it is already included in W-2 boxes 1 and 14, but that's only a dollar figure, not a per-share basis figure).
