Cost of Complying with Tax Code Requirements: $409 Billion

By on June 21, 2016 in Current Events with 19 Comments

Americans will spend 8.9 billion hours of their time at a cost to the U.S. economy of $409 billion to comply with IRS tax filing requirements in 2016 according to a new report from the Tax Foundation.

The report blames the staggering time and cost figures on the complexity of the U.S. tax code. It notes there are 7.7 million words of tax regulations and almost 60,000 pages of tax related case law combining to create a dizzying set of complexities that take up so much time and money to figure out.

The table below shows how the 8.9 billion hours of tax compliance breaks down among various entities. The bulk of the figure comes from business and individual compliance efforts.

Table 1. Estimate Hourly and Compliance Costs of IRS Paperwork in 2016
Form/Title Total Annual Hours Burden Total Annual Cost In Dollars
Top 50 Most-Costly Code Provisions
U.S. Business Income Tax Returns (1) 2,832,500,000 $147,431,625,000
U.S. Individual Income Tax Returns 2,647,000,000 $98,680,160,000
Income Tax Returns for an S Corporation (1) 889,393,518 $46,292,932,612
Form 4562–Depreciation and Amortization (1) 448,368,447 $23,337,577,666
Employer’s Quarterly Federal Tax Return (1 388,256,964 $20,208,774,976
Income Tax Returns for Estates and Trusts (1) 375,796,476 $19,560,206,576
Form 940, FUTA Tax Return (1) 105,295,370 $5,480,624,009
Form 4797–Sales of Business Property (1) 100,633,248 $5,237,960,558
Schedule C: Profit and Loss from Business 71,701,693 $2,673,039,115
Form 1099-INT, Interest Income 63,059,438 $2,350,855,849
Proceeds from Broker and Barter Exchange Transactions (1) 49,396,988 $2,571,113,225
IRA Contribution Information 48,731,780 $1,816,720,758
Short Form Return of Exempt Organizations 43,656,636 $1,627,519,390
TD 8864 Taxation of Fringe Benefits (1) 37,922,688 $1,973,875,910
Distributions from Pensions, Annuities, IRAs 37,519,860 $1,398,740,381
Form 8941 – Credit for Small Employer Health Insurance Premiums 34,278,346 $1,277,896,739
Form 1099-DIV–Dividends and Distributions 34,115,874 $1,271,839,783
26 CFR 31.6001-1 Records in general; 26 CFR 31.6001-2 Additional Records under FICA 30,273,950 $1,128,612,856
Heavy Highway Vehicle Use Tax Return 27,120,040 $1,011,035,091
Foreign Tax Credit (Individual, Estate, or Trust) 25,066,693 $934,486,315
W-8 BEN, W-8BEN-E, W-8EIC, W-8EXP, W-8IMY, W-8 MOU Program 25,003,304 $932,123,173
Return of Organization Exempt From Income Tax Under Section 501(c), 527, or 4947(a)(1) 24,951,529 $930,193,001
1099-G Certain Government Payments 24,709,380 $921,165,686
1099-Miscellaneous Income 24,639,062 $918,544,231
Form 8948, Preparer Explanation for Not Filing Electronically 18,270,900 $681,139,152
Paid Preparer’s Earned Income Credit Checklist (Form 8867) 17,824,793 $664,508,283
Reg-111583-07(TD 9405)(Final) — Employment Tax Adjustments; REG-130074-11 – Rules Relating to Additional Medicare Tax 16,900,000 $630,032,000
Employer’s Annual Employment Tax Return 15,702,300 $585,381,744
Split-Interest Trust Information Return 15,152,550 $564,887,064
Form 2678 – Employer/Payer Appointment of Agent 13,731,200 $511,899,136
REG-113572-99 (Final) Qualified Transportation Fringe Benefits 12,968,728 $483,474,180
Form 990-PF 11,054,637 $412,116,867
Employer’s Annual Tax Return for Agricultural Employees 10,880,812 $405,636,671
Form 3800, General Business Credit 8,345,000 $311,101,600
Mortgage Interest Statement 8,038,699 $299,682,699
Profit or Loss From Farming 7,845,596 $292,483,819
Form 8282, Donee Information Return; Form 8283, Noncash Charitable Contributions 7,806,097 $291,011,296
Domestic Production Activities Deduction 7,398,000 $275,797,440
Form 5300, Application for Determination for Employee Benefit Plan 7,201,200 $268,460,736
Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan 7,005,000 $261,146,400
Form 8825–Rental Real Estate Income and Expenses of a Partnership or an S Corporation 6,288,600 $234,439,008
Publication 1345, Handbook for Authorized IRS e-file Providers 6,023,762 $224,565,847
Exempt Organization Business Income Tax Return 5,262,319 $196,179,252
Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans 5,139,000 $191,581,920
Tuition Payments Statement 4,848,090 $180,736,795
Quarterly Federal Excise Tax Return 4,478,956 $166,975,480
Form 8957 – Foreign Account Tax Compliance Act (FATCA) 4,446,476 $165,764,625
Form W-2G–Certain Gambling Winnings 4,304,877 $160,485,815
Information Return of U.S. Persons With Respect To Certain Foreign Corporations 4,280,244 $159,567,496
All remaining IRS regulations (1) 285,801,030 $10,654,662,398
IRS Total 8,906,390,150 $409,241,340,626
Source: Reginfo.gov and author calculations based on BLS December 2015 estimate of hourly compensation costs. (1) For large business forms and complex forms such as estates, Tax Foundation used an hourly compensation cost of $52.05 for professional and related workers. For all other forms, Tax Foundation used $37.28, the average compensation for all full-time private sector workers

 

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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