Americans spend BILLIONS of dollars, hours to comply with US tax code: study

A summary of the study stated, "Taxpayers will spend an estimated 7.1 billion hours complying with the tax code for Tax Year 2024—equivalent to $316 billion in lost productivity based on private sector labor costs," and that Americans will also spend "at least $148 billion in out-of-pocket expenses for filing, including tax software and professional services," bringing the total cost to file taxes to around $464 billion total in labor and expenses.

NTUF said that the total time burden dropped by 11 percent in comparison to the last tax season, but that it was due to the IRS changing and not that taxes have become less complex, and reported that "IRS-related compliance makes up 61% of all paperwork burdens placed on Americans by the federal government."

The average American will spend around $290 only to prepare their taxes for filing and will also take 13 hours of labor to do so. The NTUF states, “Ideally, the average taxpayer should be able to fill out a 1040 Form in two to three hours," instead of the onerous 13 hours of tax paperwork.

Additionally, small and large businesses have wide-ranging tax burdens, with large corporations taking on average 830 hours to file taxes and 55 hours for smaller businesses.

The amount of time wasted on preparing taxes, if it were all laid out, would amount to "over 806,910 years," the organization said. It later highlighted that much of the time dedicated to tax filing is connected to its complexity.

"One of the key drivers of tax complexity is the sheer size and scope of the tax code itself: now standing at over 4 million words. When the income tax was first enacted in 1913, the tax code spanned just 27 pages. But within a few years—thanks to amendments, new regulations, and judicial rulings—the code had already risen to 400 pages," NTUF said.

The organization also cited that because changes to the tax code happen frequently, there is even more complexity to the tax code. "Between 2000 and 2024, Congress enacted an average of 369 tax code changes per year (see Figure 2). The pace has varied dramatically—from a high of 797 changes in 2010 to a low of just 3 changes in 2013," the report said.

NTUF concluded, "Reform is necessary to alleviate the burdens imposed on taxpayers and enhance the efficiency and effectiveness of the tax system," and later added that it is going to take "concerted efforts from policymakers, the IRS, and other stakeholders to simplify the tax code."