Tax-Filing Burdens Worsen, with Little Respite in Sight, Citizen Group's Annual Study Finds

(Alexandria, Va.) -- Taxpayers continue to be buried under burdensome federal income tax regulations, according to the 362,000-member National Taxpayers Union's (NTU) 10th annual study of tax law complexity trends. Taxpayers using any of the 1040 tax form series will spend an average of 26.5 hours and $207 completing their returns this year, up from 25.4 hours and $185 three years ago.

"American taxpayers are spending inordinate amounts of time and money navigating the nation's twisted Tax Code," NTU Senior Counselor and study author David Keating said. "Tax complexity probably will get worse before it gets any better, unless lawmakers start quantifying burdens (or, in the rare case, savings) for proposals that affect our tax laws."

NTU has conducted comprehensive examinations of Tax Code complexity since 1999, providing historical trends of the increased burden on citizens and businesses in complying with IRS demands. However, the IRS recently has revised its methodology for reporting compliance burdens, making NTU's research all the more challenging. Among the findings of the study:

  • Individual taxpayers will spend about 3.55 billion hours complying with income tax laws this year -- up from 3.18 billion hours last year. The value of this time is worth $92.6 billion.
  • They'll also spend a lot of money this year: an estimated $27.7 billion for tax software, tax preparers, postage, and other out-of-pocket costs.
  • Americans filing a Form 1040 with common schedules this year will confront 155 pages of instructions, nearly quadruple the number in 1975 and nearly triple the number in 1985, the year before taxes were "simplified."
  • The average long-form taxpayer paid $268 last year for out-of-pocket filing costs -- an 11 percent increase over two years. The average self-employed taxpayer paid $444 in out-of-pocket costs -- a 9 percent increase over the same period.
  • As of March 15, the average per-client fee of H&R Block (which prepares one in seven tax returns filed by all Americans) was $169.15 -- a 5.5 percent jump from the same time last year.
  • Corporations spend about $170.4 billion on tax compliance -- equivalent to 43 percent of corporate income taxes collected in FY 2007.
  • Treasury Department paperwork, which consists almost entirely of tax forms, imposed a burden of 6.97 billion hours on Americans in 2006 and a projected 7.2 billion hours in 2007. The latter figure is the equivalent of some 3.5 million employees working 40-hour weeks year-round without any vacation.
  • A new study from the accounting firm PricewaterhouseCoopers and the World Bank found that the U.S. ranks 122nd worldwide (out of 175 studied) in ease of corporate tax filing compliance; an American company would spend 325 hours filing taxes, compared to companies in Hong Kong (80), the U.K. (105), and Germany (196).

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 125, A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens, is available online and in PDF format