Study from Nation's Largest Taxpayer Group Shows Individuals, Corps., Spending Nearly $300 Billion on Tax ComplianceFor Immediate Release April 14, 2009Pete Sepp
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(Alexandria, Va.) -- Complying with the nation's Tax Code now costs American families and businesses more time, money, and frustration than ever, according to the 362,000-member National Taxpayers Union's (NTU) 11th annual study of tax complexity trends. Taxpayers using any of the 1040 tax form series will spend an average of 26.4 hours and $209 completing their returns for the most current tax year, up from 25.4 hours and $185 four years ago.
"Just in time for the Tax Day 'Tea Party' revolts being held around the country tomorrow is the unsurprising news that taxpayers are bedeviled by increasingly complex federal income tax regulations," NTU Senior Counselor and study author David Keating said. "If our study tells us anything, it's that Americans are ready to toss the U.S. Tax Code overboard and start anew with a simpler and more transparent version."
NTU has conducted comprehensive examinations of Tax Code complexity since 1999, providing historical trends of the burden on Americans to comply with IRS demands. Among 2009's findings:
- Treasury Department paperwork, some 90 percent of which consists of personal and business income tax forms, imposes a burden of 7.75 billion hours on Americans. That's the equivalent of some 3.7 million employees working 40-hour weeks year-round without any vacation -- more workers than are employed at the five biggest employers among Fortune 500 companies combined.
- Individual taxpayers will spend about 3.8 billion hours complying with income tax laws this year -- up from 3.6 billion hours last year. The value of this time is worth $110.6 billion.
- They'll also spend a lot of money this year: an estimated $29.33 billion for tax software, tax preparers, postage, and other direct out-of-pocket costs.
- The cost of paperwork time burdens for corporations facing the federal income tax (3.2 billion hours) adds up to $159.4 billion -- equivalent to 54 percent of corporate income taxes collected in FY 2008. These expenses are generally passed along to consumers, employees, and shareholders.
- Taken together, these three factors add up to $299.3 billion, over $100 billion higher than estimates from the IRS National Taxpayer Advocate's Office.
- Americans filing a Form 1040 "long form" with common schedules this year will confront 161 pages of instructions, more than triple the number in 1985, the year before taxes were "simplified." The 2008 "short form" instructions total 84 pages, equal to those of the long form in 1985.
- The average 1040 long-form taxpayer is incurring $264 for out-of-pocket filing costs in the 2008 tax year -- up from $242 in 2004. The average self-employed taxpayer is shelling out $447 in out-of-pocket costs -- up from $408 in 2004.
- With the pending expiration of the Bush tax cuts, temporary Alternative Minimum Tax "patches," and uncertainty over the future of the death tax, complexity in tax laws is likely to worsen.
NTU is a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, and economic freedom at all levels. Note: NTU Policy Paper 126, A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens, is available online at www.ntu.org.