The Long Way Home 3.13.26

Just wrapped up my 2025 tax returns. Good news: as a pensioner living mostly on Social Security, I didn’t owe any taxes except something called the payroll tax. The Bohunk and I supplement our meager Social Security earnings with whatever scratch I can squeeze out of publishers. 

As a freelance writer, an independent contractor, I pay something  called the “Self-Employment Tax.” It is the same “FICA” taxes you see deducted from your paycheck each week, but an employer isn’t paying half; I pay it all. The full 15.3% (12.4% for Social Security and 2.9% for Medicare). Unrelated to taxes, our Medicare monthly premium is more than $400 for the basic Plan B coverage, with a $250 deductible per person and a 20% co-pay for services. 

This undermines the perception of Medicare as a complementary service. Nevertheless, misconceptions persist, and there are still criticisms that elderly individuals like me receive free health care. Furthermore, I am required to continue paying into the system through ongoing self-employment taxes.

Regarding the Social Security portion of the Self-Employment Tax, government records indicate the funds I have contributed since my first payroll deduction in 1970 are sufficient to cover my current monthly payments for another decade or two. Had my Social Security contributions earned even modest interest, I might have been able to live to 100 without imposing a financial burden on society. 

Admittedly, I sometimes feel disadvantaged by the Self-Employment Tax and the generally complex process of filing and paying taxes. Having spent much of my life as an independent worker, I once believed that life beyond age 70 would be simpler.

Enough whining. When I was at the top of my earning years, many years ago, my CPA, mentor, and tax preparation guru put my tax position into perspective. After reviewing the tax returns for our businesses, which he had me sign, he presented me with our personal returns. As I scanned the first page, I saw a fair amount of tax owed. Feeling blindsided, I threw out many JFCs, HSs, and WTFs. 

As I settled down, Stanley looked me in the eyes and said, “What’s wrong with you? It’s not about what you owe in taxes; it’s the money you made that you should focus on!” One of the best philosophical lessons I ever received.

After hitting my financial low point 20-some years ago, I learned how to do my own taxes, using one online service or another. In the last few years, I have used “free tax filing” on a private firm’s website, “Online Taxes (OLT),” and haven’t paid tax preparation fees, except for the Minnesota return. 

The online process is simple, and I wondered why the government couldn’t offer a similar free service. After all, the government already has all the information I relied on, like W-2s and 1099s. 

It turns out that in 2024 and 2025, the IRS launched Direct File, allowing people with simple tax situations (about half of all taxpayers) in 25 states to file directly with the government — for free. Late last year, the Direct File program was officially suspended by the Trump administration and lawmakers. Critics argued it was too expensive, with some estimates as high as $138 per return, an unusually high estimate since private companies charged nothing to users. Perhaps more honestly, critics said Direct File duplicated existing private/corporate options. The IRS doesn't have its own universal software because of intense industry lobbying, political shifts, and a decades-old agreement with private companies.

For years, this restriction stemmed from the Free File Agreement, a 2002 deal in which the IRS promised not to develop its own filing software if private tax companies (like TurboTax and H&R Block) would provide free versions to low-income Americans. This agreement illustrates how the transition away from government-developed solutions is directly linked to deals with private interests.

Since the government isn't providing the software, private companies do, but not out of the goodness of their hearts. They use a variety of business models to cover the costs. This is a "loss leader" strategy. They hope to get you in the door for free, then charge you for "upgrades" if you have health savings accounts (HSA), student loan interest, or a freelance side hustle. Many "free" federal services make money by charging to file your state return.

My original intention was to address the exaggerated issue of voter fraud, which is being promoted to persuade the public to support increased federal oversight of a fundamental freedom. I will discuss this topic in the next installment.

Taxes are essential. Yet it is important to consider why corporate interests and those of the one-percent class complicate what are otherwise straightforward solutions to our people's needs.