April 2011

The Growing Burden of Paying our Federal Income Taxes

By Amy K. Frantz

It’s that time of year again, when our federal income taxes are due. While the extension of the Bush Tax cuts passed last December prevented the income tax rates from going up, unfortunately, the total time and monetary cost to file your federal income taxes is larger than it was last year, and it is likely this burden will continue to grow each year.

This year those who are procrastinators get an extra couple of days to file your taxes – the due date of your federal income tax return has been moved to Monday, April 18, 2011 because of the District of Columbia’s Emancipation Day holiday (this due date applies to all, even those not living in the District of Columbia).[1]  These extra few days may help, as the average amount of time needed to complete and file a 1040, 1040A, or 1040EZ form, as estimated by the Internal Revenue Service (IRS), has increased from 17.3 hours last year to 18 hours this year.[2]  The average time burden includes time spent on record keeping, tax planning, form completion, and form submission.

The monetary cost of preparing and filing your federal income tax form has also risen since last year. Nina E. Olson, the National Taxpayer Advocate, indicated that taxpayers “find return preparation so overwhelming that about 60 percent now pay preparers to do it for them.  An additional 29 percent use tax software, with leading software packages costing $50 or more.”[3]

As a result of the growing complexity of filling out the tax forms, the IRS estimates that the average cost of completing and filing one of the 1040 tax forms rose from $225 last year to $240 this year.[4]  Broken down more specifically by the type of 1040 form, the IRS estimates that for the 2010 tax year “the average burden for taxpayers filing Form 1040 is about 23 hours and $300; for taxpayers filing Form 1040A, it is about 9 hours and $130; and for taxpayers filing Form 1040EZ, it is about 7 hours and $60.”[5]

If even the EZ (“easy”) form to file your federal income taxes takes an average of seven hours to complete, that is a sure sign that your tax system is too complex. According to Taxpayer Advocate Nina Olson, “the tax code nearly tripled in size during the past decade — to 3.8 million words in February 2010 from 1.4 million in 2001.”[6]  “The basic tax instruction booklet alone now covers 179 pages, compared to only 117 pages in 2000, according to Pete Sepp, executive vice president of the National Taxpayers Union in Alexandria, Virginia.”[7]

Elected officials often talk about the need to make the federal income tax system easier for taxpayers to understand and less complex to file. President Obama, in this year’s State of the Union Address, said “In fact, the best thing we could do on taxes for all Americans is to simplify the individual tax code. This will be a tough job, but members of both parties have expressed an interest in doing this, and I am prepared to join them.”[8]  However, rarely do elected officials follow through and actually simplify the tax code.  As those bearing the ever-growing burden, in both time and money, of the federal income tax code, America’s taxpayers need to hold our elected officials accountable to the promises they make to simplify our nation’s income tax system.

Amy K. Frantz is Research Vice-President 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] Instructions for IRS form 1040 for 2010, Department of the Treasury Internal Revenue Service, p. 6, <http://www.irs.gov/pub/irs-pdf/i1040.pdf>, accessed on March 18, 2011.

[2] Ibid, p. 95, and Instructions for IRS form 1040 for 2009, Department of the Treasury Internal Revenue Service, p. 98, <http://www.irs.gov/pub/irs-prior/i1040–2009.pdf>, accessed on March 18, 2011.

[3] Phil Britt, “Taxpayers Spend Nearly $260 Billion Just to File Taxes,” Budget & Tax News, Heartland Institute, April 2011, p. 14.

[4] Instructions for IRS form 1040 for 2010, p. 95; and Instructions for IRS form 1040 for 2009, p. 98.

[5] Instructions for IRS form 1040 for 2010, p. 95.

[6] Britt.

[7] Ibid.

[8] “Remarks by the President in State of Union Address,” The White House, Office of the Press Secretary, January 25, 2011, <http://www.whitehouse.gov/the-press-office/2011/01/25/remarks-president-state-union-address> accessed March 18, 2011.