Tax Filing Woes Worsening Due to Complex Laws, Citizen Group's Annual Study Finds

(Alexandria, VA) -- By most measurements the burden of filing federal income taxes hasn't gotten any easier for Americans to bear, according to the non-partisan National Taxpayers Union's (NTU's) 8th annual study of tax law complexity trends. Even with the assistance of computer software, the typical 1040 long form filer will still spend at least a day and a half completing his or her income tax return this year.

"Whether they choose to let pros prepare their taxes, or try the latest computer assistance, or go it alone with pen and calculator, Americans are paying a dear price in money and time because of our complex tax system," said NTU Senior Counselor and study author David Keating. "Recent tax relief laws have helped many taxpayers keep more of the money they've worked for all year, but the work of filing their federal returns at tax time has become a tiresome chore."

The NTU study is the eighth major examination of Tax Code complexity the group has conducted since 1999, and thus provides a unique evaluation of how citizens have been confronted with compliance hurdles over time. This year, the Internal Revenue Service revised its methods for calculating tax-form completion times, thereby presenting new challenges to NTU's analytical skills. Among the findings:

  • The 1040 tax form with common Schedules A, D, and others will take the average taxpayer 37.8 hours to prepare this year -- with the assistance of a computer! Even the so-called "short" form will take more than half a day (12.6 hours) to complete.
  • Self-employed taxpayers filing the 1040 with small business schedules face an 80.2-hour completion task -- the equivalent of two weeks' paid vacation.
  • For the second year in a row, roughly 9 out of 10 filers in 2006 appear to be using a paid preparer and/or a computer for assistance in filing their tax returns.
  • As of March 15, H&R Block's average per-client fee stood at $154.24, a 6.3 percent jump from the same period last year.
  • Today, taxpayers must wade through 142 pages of instructions for the standard 1040 form and schedules, up from 128 pages last year, and more than double the number in 1985 -- the year before taxes were "simplified." These estimates are probably too low since they ignore the countless hours spent on tax minimization strategies.
  • The total number of paperwork hours imposed by the Department of the Treasury exceeds 6.4 billion hours (most of which are IRS-related). Despite agency regulatory actions in Fiscal Year 2004 that reduced the paperwork mountain by 137 million hours, statutory changes by Congress piled 101 million hours back onto taxpayers.

"New IRS measurement techniques can't disguise the same old complexity problems that have bedeviled taxpayers for many years," Keating concluded. "Congress needs to recognize that tax simplification should go hand in hand with tax reduction."

NTU is a non-profit, non-partisan citizen organization founded in 1969 to work for lower taxes and smaller government at all levels. Note: NTU Policy Paper 120, A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens, is available online and in PDF format