NCPA - National Center for Policy Analysis

What's the Cost of Filing Taxes? $37 Billion

September 15, 2014

Taxes are expensive enough, but what about the cost of tax compliance? Joshua McCaherty of the Tax Foundation attempted to measure the cost of filing taxes with the Internal Revenue Service.

With years of new legislation, regulations and changing tax policy, the tax code today is monstrous, weighing in at more than 70,000 pages. All of those pages must be interpreted and understood by tax filers, which takes time and money. According to McCaherty: 

  • The average individual (nonbusiness) tax return will take 8 hours to prepare, at a cost of $120.
  • Altogether, as there were 169 million individual tax returns in 2012, American taxpayers spent 1.35 billion hours simply filing their taxes in 2012.

Business tax compliance is even more burdensome:

  • According to the IRS, the average business tax return will take 23 hours to prepare, at a cost of $420.
  • There were more than 10 million business tax returns filed in 2012, meaning that more than $4.4 billion was spent simply to file (not pay for) taxes, taking 240 million hours.
  • And businesses face other taxes in addition to taxes on their income. The cost of labor tax compliance (for which 30 million businesses filed tax forms in 2012) adds an additional 55 hours of work per business and another $12.6 billion in costs.

In total, McCaherty calculates that Americans spent more than 3.24 billion hours preparing their 2012 tax returns -- the equivalent of 369,858 years and $37 billion annually to file federal individual, business and employment taxes.

Source: Joshua D. McCaherty, "The Cost of Tax Compliance," Tax Foundation, September 11, 2014.

 

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