Filing taxes can be complex and time-consuming, and when you add up all the hours Americans spend to comply with the tax code, it’s an astonishing sum.
Taxpayers will spend a total of over 7.9 billion hours on tax filing and compliance-related activities this year, according to an analysis of government data by the Tax Foundation.
The nonprofit research group says the country’s “Byzantine tax code” results in a tremendous amount of wasted time. The cost of all that drained time adds up to $413 billion, according to the foundation’s calculations, which assume that an hour of an individual’s time costs $44.50.
Despite many efforts over the years to make the tax filing process more efficient, including recent initiatives like the IRS simplifying dozens of taxpayer notices and ensuring those notices are readable at a 5th-grade comprehension level, the Tax Foundation says the amount of time Americans spend doing taxes is still “shocking.”
Americans are also burdened by the direct costs of doing taxes, including fees for online tax preparation services or payments to tax professionals. These out-of-pocket costs add up to $133 billion per year, according to the Tax Foundation. Altogether, that means America’s complex tax code costs the country $546 billion.
Americans spend billions of hours filing taxes
Individual income tax return filing is the most time-consuming element of the tax system, with the average taxpayer spending 13 hours to comply with the Form 1040. For individuals with business income, the average amount of time it takes to file taxes is even higher: 24 hours.
The estimates of how much time Americans spend doing taxes are based on surveys of individuals and businesses, as well as modeling and administrative Internal Revenue Service (IRS) data. This data is available thanks to the Paperwork Reduction Act of 1980, which mandates that the IRS calculate the burden for Americans to complete federal tax forms.
This “taxpayer compliance burden” includes various activities that eat up time. It’s not just the filing of over 270 million tax returns, but also “record keeping, tax planning, gathering tax materials [and] learning about the law.”
Overall, it reportedly takes Americans 12 billion hours annually to comply with federal government paperwork. Two-thirds of that time is spent on tax-related paperwork.
The IRS hopes to streamline tax processes for Americans by increasing what you can do online and continuing to improve the efficiency of tax messaging, according to a government report.
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