The Cost of All Those Tax Forms

April 20, 2005

Most Americans think of their tax burden as the amount on the bottom line of their 1040 form. But the cost of taxes isn’t just what we pay. It’s also the lost time we spend filling out forms.

Economists call these “tax compliance” costs. As a recent AP story reports, the IRS estimates Americans will spend 6.6 billion hours filling out tax forms this year, including 1.6 billion hours on the ubiquitous 1040 alone. Incredibly, tax forms now account for roughly 80 percent of the entire paperwork burden of the federal government.

In 2002 the Tax Foundation published an extensive study of the cost of complying with the federal income tax code (download the full PDF here). Its conclusion? Americans spent $194 billion dollars on tax forms that year, which amounts to 20 cents of compliance cost for every dollar collected by the tax system.

Given this, it’s no surprise 70 percent of U.S. adults say they “hate” or “dislike” doing their income taxes.

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