Does IRS publish tax EQUATIONS?

Interesting. I have poked around on the IRS website and I also see that some forms are available in the XML markup language. This appears to be the case especially for forms used by corporations rather than individuals, but I could be wrong. XML of all tax forms might be a god idea :).

That would make it easier, wouldn't it?

Every data field is defined to death somewhere, but I seriously doubt that IRS publishes it, and nobody's going to give your their code that manipulates and analyzes the data.

AFAIK e-file is the only non-governmental system that directly interacts with the IRS processing system, and you've already been given information about those record specifications, which include just about everything that would be on a tax return. I have no idea what "interesting things" you want to pursue, but what data elements are missing from the e-file record?

Actually, Dick, my impression is that commercial tax software writers work with IRS tax form instructions only; well maybe with a passing reference to a publication upon occasion. I say this after participating in efiling since 1989 and having many times in the past had to override certain line entries to make things come out right.

ChEAr$, Harlan

Be assured that "they" are working on that for individuals, however the project has been postponed for another year. Oh drat!

ChEAr$, Harlan Lunsford, EA n LA

And when is the deadline for the IRS to publish the final, final, final rules for year 200X, so the tax software makers can implement, and check, and double-check their software? (Is it, for example, 31 Dec

200xX?) [Side question which I know is silly: If people are to be able to make informed financial decisions during 200X, shouldn't the tax rules for 200X be frozen on 1 Jan 200X? (except maybe for an xx % surcharge to handle emergency situations)]

As Harlan said, the 1040 series of returns were supposed to be XML compatible a while ago. Helen O, who has served on the IRS committee for e-filing issues, reviews the status at least once a year and the latest review was "not this year."

But for those with faith, when XML is ready for 1040s, even a 1040X will be e-filable.

(XML is an extended markup language, a next generation .pdf)

Well, last year the Stimulus Rebate was still fuzzy-ish in January or even later. And I hear talk of a newer and better and different rebate package right now.

When Congress gets around to it.

Back when the Earth was cooling and I was involved in the process the drop dead OK to print date was mid-September. (That was before e-file, and the IRS printing order was the world's largest.) Depending on the mood of Congress, sometimes it was met and sometimes not.

In planning meetings IRS computer people will say they need a minimum of 18 months to find the "on" switch, but in the end they get things done with the time they're given. There's actually pretty good informal communication with Congress when there are legislative delays (and between IRS and the software vendors), so they can have patches ready and waiting for the legislation. However, there's still some time needed to install and test the patches, so sometimes specific forms will be delayed for e-filing. There have also been occasions when changes were made too late to be reflected on paper forms, in which case workarounds were found and published.

"Arthur Kamlet" wrote

Naaaa. They're just redesigning the packaging. After all, what's new, better, or different about money?

No, all the software makers I know of continue to send out updates throughout the entire e-filing period (Oct 15th). It's quite possible you could file and have accepted a return before the filing deadline, and then need to file an amendment due to an error that the software maker fixes after that time (if the IRS software doesn't catch it first).

The Internet has made possible a "just in time" delivery method that allows vendors of all types of products to release to market for competitive purposes before a product is truly ready, and then they just compel you to download updates before you use (and, not coincidentally, agree to licensing restrictions, liability limitations, etc). For example, I just purchased a universal remote control device for audio-visual equipment, and the first step out of the box resulted in a firmware update from the vendor's site.

-Mark Bole

Care to share? It's hard for me to believe that there are any features that could be *profitably* provided to the mass market that haven't already been.

-Mark Bole

Also there are 40-some states and hundreds of more city tax returns that may not have even yet approved the forms and data generated by the software vendors. For someone to trust the program "as-is" from a box of software they buy at the corner gas station is crazy.

HR block probably has these interesting things covered in their own propretary worksheets. For example is it best to take tuition and fees deduction, hope credit or lifetime learning credit for a given return? What if two eligible students exist on the same return? Three?

I do agree the softwares like turbo tax do not appear to optimize these things... and there is room in any software for improvement.

I downloaded the 1346-series pdf files and they do indeed contain every last detail about every last form as part of this "1040 e-file" package. All field codes, field byte sizes etc etc are there in gory detail.

BUT: As moderator said, there appears to be no equations included, so those must be manually deduced. Too bad.

Harlan and moderator: Certainly the equations cannot capture which fields and worksheets you need to fill out in order to get a correct representation of your tax situation. That would be the job of the "interview" subsystem of the tax software, which is a different story. By the way, I tried to download a copy of the source code for gnuTaxes, which is a dormant and unfinished free tax software project started in year 2000. That project as an example talked about the interview logic versus the form logic, if you will. But personally I would be happy to be able to hack up some calculations only, never mind the interview stuff. (more below).

Here's my favorite example: I use a commercially available spreadsheet (hint: sometimes discussed in this very newsgroup) to do my form 2210 estimated tax calculations. It is a great product, but being a spreadsheet it has some inherent limitations.

The main distinguishing feature of a spreadsheet relative to an interactive calculation language (think Visual Basic for a mainstream example) is that a spread sheet is a mixture of the data with the logic/equations. There is not simple way to separate the two.

Hence, if you want to do something new, something different, or just port the data to a new release of the spreadsheet, you are looking at lots of manual work.

Now, there are other languages where you could easily jigger up the calculations in a form where the data and the equations/logic are separated. Personally I would use Matlab or Octave (free almost-clone of matlab) and I would literaly be able to write the programs in the form I previously alluded to, that is

//some form1040 equations written in matlab or octave form1040.line76.purpose= "Amount You Owe"; form1040.line76 = form1040.line63 - form1040.line72;

I could save the data very easily, and I could separate and modify the code easily. This is what I had in mind. On top of that I could do all kinds of graphing, generate reports, etc. Operations that I find very cumbersome in spreadsheets.

If you were real ambitious, you could implement all of 1040 efile in this manner. I don't care so much about the interview system, but you could do that as well.

In summary:

1. commercial packages do not implement form 2210 (as an example)
2. form 2210 spreadsheet is cumbersome (as an example)
3. there are better ways, if only the equations where available.

TurboTax has had an education credit vs. deduction optimizer including all students covered on the return for many years now (even before the tuition and fees deduction was created, it still helped you choose the best combination of Hope and Lifetime Learning credits).

I can only assume that other major players have the same feature.

-Mark Bole

I'm pretty sure you could use the previous year's tax program to create a dummy return and get numbers that are within a few percent of being "perfect". It would be nice to have a little switch that would allow you to use the previous year's tax laws but enter dates for the current year, but you can fake it in your head pretty easily.

With MS Excel you can link to other worksheets (data ranges) or even an MS Access database. It is possible to separate logic and data. Or, if you are already prepared to program in VB, just use MS Access itself.

In my original reply, I raised the issue of cost vs. benefit. If you spend 20 hours programming, testing, and debugging something to only save a $20 penalty or earn an extra $20 interest, is it really worth it? I'm claiming you could probably get as close as that just by using last year's software as a planning tool.

In my experience, both on my own taxes and those of clients, it is a very small minority who need the annualized method on Form 2210 (I assume this is what you are mostly referring to here). Since no one issues 1099's and 1098's and W-2's more than once a year, even with a perfect software tool, you'd still have to spend a lot of time segregating all your income and deductions by each estimated tax "quarter" (unless your only entries are on a Schedule C or Schedule E, but again, how common is that?)

-Mark Bole

Tax law is not the only kind of law that can legally be applied retroactively (only criminal law cannot be retroactive, except insofar as it deals with amounts of tax due) but it's the main one. Taxes are often imposed or changed as of the date of a policy announcement (or soon thereafter) to avoid distorting taxpayers' activities. A more expansive reading of the exceptions to the ban on ex post facto laws appears in the Wikipedia page on that subject -- which mentions administrative laws but not specifically tax laws. (Googling "retroactive tax laws" yields a lot more on that subject.)

The worst taxes of all are debt deflation (loss of value of your assets while your debt remains unchanged) and inflation (loss of value of your savings). We are facing both now; my guess is that the house price crisis will be resolved by massive general inflation due to the printing of money (and so foreign bondholders will share in that "tax"). But then I'm only halfway through Galbraith's book on the Great Depression and Christina D. Romer's article on "What Ended the Great Depression?" -- so what do I know.

That is a good idea. Basically, each quarter I would have a new file that contains the cumulative income (etc) up to that point, and then pay the total taxes owed minus whatever I already paid the previous quarters.

No doubt, but said spreadsheet is a jumble of data and equations, and trying to separate the data into one worksheet and the equations into another would be a monstrous undertaking of reverse engineering for someone that did not write nor understand the structure of the logic.

The easy solution would be write a Perl script that turned a bunch of published equations into Perl or Matlab or Octave or VB. It should not be all that much work if only equations and formulas were published. Too bad they are not.

I burned myself before, hence the current interest in the topic :-)

I'm one of those less common cases where it really has been making a difference lately.

Lots of good advice today. I think the moral of the story is that the world needs open-source tax software that is user-extensible. That could get really exciting (in a good way :-)).