Filing Taxes in the US vs. Sweden: A Tale of Two Systems

For Jens Peter de Pedro, a Swedish expat living in the US, the stark differences between filing taxes in his home country and his adopted nation are striking.

In Sweden, de Pedro receives a pre-populated tax return from the government, making it a breeze to file his taxes. He can sign and return it via mail, app, or even text message.

In contrast, his American wife spends days grappling with their taxes, a process de Pedro describes as a "pain point" for their family. "I don't understand what makes it so complicated in the US," he says.

Welcome to tax time in America, where the average citizen spends 13 hours and $270 on tax preparation. The nation's tax code spans 4 million words, and its complexity has led to a fifth of eligible Americans missing out on valuable tax credits.

Why is the US Tax System So Complicated?

Over in the UK, Alex Kirkley has no need to reconcile his taxes with his employer. The system is automatic, with taxes deducted from his paycheck just like in the US. However, the UK's Pay As You Earn system aims for more precise withholding, making it more efficient.

A key factor in the US tax system's complexity is the myriad of credits and deductions available. While other countries may have designated social welfare programs, the US provides assistance through the tax code, such as the earned income tax credit (EITC). These benefits are helpful, but they also add complexity to the tax filing process.

Simplification Efforts and Challenges

The Tax Cuts and Jobs Act (TCJA) of 2017 simplified the system to some extent by doubling the standard deduction and reducing itemized deductions. Additionally, the IRS's Direct File program allows taxpayers in select states to submit returns for free, streamlining the process.

However, significant hurdles remain. To truly simplify the tax code, the US would need legislative changes to require companies to report income data to the IRS earlier. This would pave the way for pre-populated tax returns and even automated tax calculations by the IRS.

Freelance Taxation: A Global Issue

One area where simplification has proved elusive is freelance taxation. In both Sweden and the UK, freelancers must gather receipts and invoices to determine their tax liability, a time-consuming process.

While countries strive to overcome these challenges and simplify their tax systems, the US still lags behind. The steps taken through the Direct File program are promising, but more needs to be done to make filing taxes less burdensome and more accessible for all Americans.