May 2007

Paying Income Taxes Can Be Taxing

By Amy K. Frantz

We all face the obvious burden of the amount of income taxes we must pay to the government each year. But there is also the burden of the act of paying those taxes.  From the time and effort required to fill out and file all the necessary Internal Revenue Service (IRS) forms to the expense of the IRS employees that process those forms, individuals are facing an increasing burden above and beyond the actual taxes paid.

The 2006 National Taxpayers Union policy paper, “A Taxing Trend: The Rise in Complexity, Forms, and Paperwork Burdens,” indicates that the 2005 federal 1040 form has increased to 76 lines, up from 70 lines in 2000, and 66 lines in 1995.[1]  While ten additional lines in ten years may not seem terribly excessive, the additions must have been quite complex.  The number of pages in the instruction booklet that accompanies the 1040 form increased from 84 pages in 1995 to 142 pages in 2005[2] — 58 additional pages of instructions are necessary to complete those ten additional lines on the tax form!

How times have changed when it comes to tax preparation. In 1955 the 1040 form was 28 lines long, and only needed an instruction booklet of 16 pages to complete the form.  Twenty years prior to that, in 1935, the form was a bit longer – 34 lines – but the instruction booklet was only two pages in length.[3]

Form 1040 – Form and Instructions[4]

Tax Year Lines/1040 Form Pages/1040 Instruction Booklet Pages/1040
2005 76 2 142
2003 73 2 131
2000 70 2 117
1995 66 2 84
1985 68 2 52
1975 67 2 39
1965 54 2 17
1955 28 2 16
1945 24 2 4
1935 34 1 2

Another measure of the increasing length and complexity of our tax system is the number of words in the Internal Revenue Code. Tax Foundation, in “The Rising Cost of Complying with the Federal Income Tax,” reports that the number of words in the Code related to the income tax has grown dramatically, from 172,000 words in 1955 to 1,286,000 words in 2005.[5]  IRS income tax regulations have also considerably expanded, growing from 547,000 words in 1995 to 5,778,000 words in 2005, “an increase of 956 percent.”[6]

The increasing length of the instructions required to complete our federal taxes may be leading us to look for alternative methods of filing our taxes. In 2005, just over 61 percent of the income tax returns filed were prepared by paid tax preparers.[7]  Nearly 30 percent of those filing tax forms on their own do so with the aid of tax preparation software.[8]  Less than ten percent of the returns filed in 2005 were completed the old fashioned way — reading the (lengthy) instruction booklet and filling out the 1040 tax form by hand.

Tax Foundation has calculated the number of hours required by individuals to pay federal income taxes. This includes time spent keeping the required records, learning about tax laws and changes, preparing the federal tax forms, and sending in those forms to the IRS.  In 2005, 2,824,959,943 hours were devoted to paying our personal federal income taxes.[9]  Based on current U.S. population, each man, woman, and child must spend an average of 9.4 hours working to file federal income taxes.[10]  For a family of four, the average time required to pay federal income taxes is 37.6 hours — time that I am sure most families would prefer to spend on other activities.

Federal taxes also create a cost to us through the funding required to operate the Internal Revenue Service to process our taxes. In Fiscal Year 2004, the IRS had 98,735 employees.[11]  That amounts to one IRS employee for every 3,031 individuals in the United States.  The operating costs of the IRS in FY 2004 were $9,756,300,000.[12]

Our tax system is already extremely complicated and is becoming more complicated each year. Elected officials often talk about tax reform, but few reforms are actually accomplished, and when “reform” does occur, it can result in an even more complicated tax system.  Those who are tired of the time, effort, and monetary costs of paying federal income taxes under the current system should demand that our elected officials consider the merits of proposals such as the national retail sales tax or the flat tax, and adopt a tax system that is truly more simplified and less taxing to us all.

Amy K. Frantz is Senior Research Analyst at Public Interest Institute. 

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation. They are brought to you in the interest of a better-informed citizenry.

[1] David Keating, “A Taxing Trend:  The Rise in Complexity, Forms, and Paperwork Burdens,” National Taxpayers Union Policy Paper 120, April 17, 2006, <http://www.ntu.org/main/press_papers.php?PressID=829&org_name=NTU> (July 11, 2006).

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] J. Scott Moody, Dr. Wendy P. Warcholik, and Scott A. Hodge, “The Rising Cost of Complying with the Federal Income Tax,” Tax Foundation Special Report, December 2005, No. 138, p. 4.

[6] Ibid, pp. 4-5.

[7] David Keating, “A Taxing Trend:  The Rise in Complexity, Forms, and Paperwork Burdens,” National Taxpayers Union Policy Paper 120, April 17, 2006, <http://www.ntu.org/main/press_papers.php?PressID=829&org_name=NTU> (July 11, 2006).

[8] Ibid.

[9] J. Scott Moody, Dr. Wendy P. Warcholik, and Scott A. Hodge, “The Rising Cost of Complying with the Federal Income Tax,” Tax Foundation Special Report, December 2005, No. 138, p. 9.

[10] Current U.S. population is found on U.S. Census Bureau website, <www.census.gov> (July 21, 2006).

[11] J. Scott Moody, Dr. Wendy P. Warcholik, and Scott A. Hodge, “The Rising Cost of Complying with the Federal Income Tax,” Tax Foundation Special Report, December 2005, No. 138, p. 10.

[12] Ibid.