Tax Compliance Now Takes More Than 7 Billion Hours

 
 
November 17, 2011

IRS Commissioner Douglass Schulman recently spoke about complexity in the tax code and associated compliance costs:

"Making the tax code less complex is the single most important thing that could be done to improve taxpayer service and boost compliance.

...

Perhaps the most telling indicator of taxpayer confusion over the code's complexity is that today, 90% of individual taxpayers pay for professional tax preparation or tax software to prepare their tax returns. IRS research estimates that, over the past 10 years, the burden for the typical taxpayer has increased by about 20% and would likely be even more if they had to prepare returns themselves without any aids or tools. Moreover, we estimate individual taxpayers and businesses spend more than 7bn hours each year complying with filing requirements.

...

Complexity grows incrementally with every legislative session. The 15,000 plus changes to the tax code since 1986 are anything but elegant, anything but simple, and anything but clear to the average taxpayer. A simpler system could better further policy goals by having a more involved and engaged taxpayer base that would take advantage of incentives to which they are entitled and thereby improve their economic position."

The more than 7 billion hours it takes to comply represents about a 15 percent increase over last year's estimate of 6.1 billion.  To put that figure in context, it amounts to about 3.5 million people working full time for a year, or about 25 percent of the 14 million who are unemployed.

Follow William McBride on Twitter @EconoWill

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