Hours Spent in 2016 Complying with U.S. Tax Code: 8,900,000,000

Americans will spend 8.9 billion hours complying with IRS tax requirements in 2016. Let that sink in for a moment. Earlier this month the Tax Foundation issued Fiscal Fact No. 512, which breaks down this staggering time-suck.[1] The Tax Foundation utilized data from the Office of Information and Regulatory Affairs and the Bureau of Labor Statistic in reaching this estimate.

The majority of the 8.9 billion hours will be spent complying with U.S. business (2.8 billion hours) and individual income (2.6 billion hours) tax returns. But how much is 8.9 billion hours? Your mind (read, the human brain) cannot comprehend the sheer magnitude of 8.9 billion…anything. A little perspective is required.

8.9 billion hours ago, it was roughly 1,000,000 B.C.E.: there were approximately 30,000 Neanderthals on Earth spreading through Africa, Europe, and Asia. These Neanderthals would eventually go on to make you, me, and the Internal Revenue Code.

8.9 billion seconds ago, it was 1733: James Oglethorpe was just founding Savannah, Georgia.

Take 8.9 billion steps, and you could walk to the moon and back, over three times.

You get the idea.

What is the fiscal impact of 8.9 billion hours?  The Tax Foundation estimates that all in all, tax compliance will cost the U.S. economy $409 billion dollars.

Why such astronomical costs to comply with U.S. Tax laws?  It’s complicated. For starters, the Internal Revenue Code contains about 2.4 million words. Federal Tax Regulations contain an additional 7.7 million words. Mercifully, tax court decisions comprise a mere 60,000 words.

The Tax Foundation’s report is littered with fascinating statistics. For example, the compliance costs for America’s 4 million S-corporations totals more than $46 billion annually, nearly $12,000 per firm. It still beats double taxation. The estate and gift tax, which will generate approximately $20 billion in tax revenue for the feds this year, has a compliance cost of $19.6 billion.

These numbers are staggering. Remember, this compliance cost applies only for 2016; this cost probably increases every year. Also be mindful that these numbers represent the cost of federal tax compliance – the cost of state tax compliance is not included, which is no doubt substantial.s

Having a comprehensive and fair tax system is critical to capitalist economy that is constantly injecting the market with new and complicated transactions. But this might be a little overboard.

On the bright side, as long as machines and algorithms are unable to prepare federal taxes, there should be plenty of work for accountants and tax lawyers.

— By Michael S. Cooper, Esq., Barnes Law

Michael Cooper is an associate attorney with Barnes Law, and is licensed to practice law in California.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] http://taxfoundation.org/sites/taxfoundation.org/files/docs/TaxFoundation_FF512.pdf