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IMA Tax Policy Blog

Americans Will Spend 8.9 Billion Hours, $409 Billion Complying with U.S. Tax Code in 2016

The length and detail of the U.S. tax code have increased substantially over the past century. Today, the U.S. tax code is twice as long as it was in 1985 and nearly six times longer than in 1955, totaling roughly 7.7 million words of tax regulations and almost 60,000 pages of tax-related case law. This increase in complexity translates into real costs for American businesses and households.

The IRS recently estimated that Americans will spend 8.9 billion hours complying with IRS tax-filing requirements in 2016. And according to a new analysis from the nonpartisan Tax Foundation, this translates to an annual tax compliance cost of $409 billion, or an equivalent of 4.3 million full-time jobs. These calculations have increased substantively since 2012, when the IRS estimated the total IRS paperwork burden to account for 6.1 billion hours.

“Time is the most valuable thing we have, and we should not be forced to waste it complying with IRS forms,” said Tax Foundation President Scott Hodge.

“Congress needs to keep this in mind as they move forward with tax reform over the next year. In addition to fostering economic growth, we need reforms that ease the burden of time on taxpayers. I think that’s something we can all get behind.”

The Tax Foundation’s analysis provides a breakdown of the most costly IRS forms and provisions for businesses and individuals. For example, the time spent complying with business income taxes costs $147 billion annually, while preparing individual income taxes costs another $99 billion.

There are also cases where the cost of compliance for a specific tax is nearly equal to the amount of revenue that tax brings in. The estate and gift tax, for example, will collect approximately $20 billion in federal revenues this year, but has a compliance cost of $19.6 billion.

Full report: The Compliance Costs of IRS Regulations