Cost of Complying with Tax Code Requirements: $409 Billion

Americans will spend 8.9 billion hours to comply with tax filing requirements in 2016 according to a new report.

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/TitleTotal Annual Hours BurdenTotal 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 Returns2,647,000,000$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 (1388,256,964$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 Business71,701,693$2,673,039,115
Form 1099-INT, Interest Income63,059,438$2,350,855,849
Proceeds from Broker and Barter Exchange Transactions (1)49,396,988$2,571,113,225
IRA Contribution Information48,731,780$1,816,720,758
Short Form Return of Exempt Organizations43,656,636$1,627,519,390
TD 8864 Taxation of Fringe Benefits (1)37,922,688$1,973,875,910
Distributions from Pensions, Annuities, IRAs37,519,860$1,398,740,381
Form 8941 – Credit for Small Employer Health Insurance Premiums34,278,346$1,277,896,739
Form 1099-DIV–Dividends and Distributions34,115,874$1,271,839,783
26 CFR 31.6001-1 Records in general; 26 CFR 31.6001-2 Additional Records under FICA30,273,950$1,128,612,856
Heavy Highway Vehicle Use Tax Return27,120,040$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 Program25,003,304$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 Payments24,709,380$921,165,686
1099-Miscellaneous Income24,639,062$918,544,231
Form 8948, Preparer Explanation for Not Filing Electronically18,270,900$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 Tax16,900,000$630,032,000
Employer’s Annual Employment Tax Return15,702,300$585,381,744
Split-Interest Trust Information Return15,152,550$564,887,064
Form 2678 – Employer/Payer Appointment of Agent13,731,200$511,899,136
REG-113572-99 (Final) Qualified Transportation Fringe Benefits12,968,728$483,474,180
Form 990-PF11,054,637$412,116,867
Employer’s Annual Tax Return for Agricultural Employees10,880,812$405,636,671
Form 3800, General Business Credit8,345,000$311,101,600
Mortgage Interest Statement8,038,699$299,682,699
Profit or Loss From Farming7,845,596$292,483,819
Form 8282, Donee Information Return; Form 8283, Noncash Charitable Contributions7,806,097$291,011,296
Domestic Production Activities Deduction7,398,000$275,797,440
Form 5300, Application for Determination for Employee Benefit Plan7,201,200$268,460,736
Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan7,005,000$261,146,400
Form 8825–Rental Real Estate Income and Expenses of a Partnership or an S Corporation6,288,600$234,439,008
Publication 1345, Handbook for Authorized IRS e-file Providers6,023,762$224,565,847
Exempt Organization Business Income Tax Return5,262,319$196,179,252
Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans5,139,000$191,581,920
Tuition Payments Statement4,848,090$180,736,795
Quarterly Federal Excise Tax Return4,478,956$166,975,480
Form 8957 – Foreign Account Tax Compliance Act (FATCA)4,446,476$165,764,625
Form W-2G–Certain Gambling Winnings4,304,877$160,485,815
Information Return of U.S. Persons With Respect To Certain Foreign Corporations4,280,244$159,567,496
All remaining IRS regulations (1)285,801,030$10,654,662,398
IRS Total8,906,390,150$409,241,340,626
Source: 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

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.