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Code Called ‘Shockingly Complicated’

The U.S. tax code has become so complex that the paperwork burden generated by the Treasury Department — almost all of it from the Internal Revenue Service — now totals a mind-boggling 6.7 billion hours.

That is the equivalent of about 3.35 million employees working 40-hour weeks year-round with just two weeks off, according to a new report from the National Taxpayers Union — released, fittingly enough, on April 15. That’s double the number of elementary school teachers and 10 times the number of mail carriers.

Those 6.7 billion hours, when calculated with the average employer cost for civilian workers, add up to $206 billion. Another $34 billion is spent on tax software, tax preparers, postage, and other out-of-pocket costs, bringing the total cost to about $240 billion a year.

That figure doesn’t even include the hours taxpayers spend on state and local taxes or responding to IRS audits.

“A review of past years’ tax documents compared to today’s forms and instructions reveals just how shockingly complicated taxes have become,” observes David Keating, senior counselor for the 362,000-member National Taxpayers Union, a nonprofit, nonpartisan organization founded in 1969.

Other eye-opening facts uncovered in the report include:

  • The most recently published tax code had 3.95 million words — 112,000 more than in 2010.
  • In addition, there are 20 volumes of regulations containing 10.4 million words.
  • Since 2001, there have been about 4,680 changes to the tax code, an average of more than one a day.
  • In 1935, the instruction booklet for Form 1040 contained just two pages. In 2012, it had 214 pages.
  • The IRS now lists more than 2,000 publications, forms, and instructions for download from its website, up from 1,770 as recently as 2009.
  • Corporate tax returns can be massive. For example, the returns that GE filed in recent years contained more than 24,000 pages.
  • The average fee charged by H&R Block to prepare a return was $192 last year — up from $27 in 1980.

“While the 1998 IRS Restructuring and Reform Act requires Congress to at least consider complexity before passing tax legislation, that has not provided enough incentive for lawmakers to avoid additional complexity or encourage simplification,” Keating says.

“Fundamental overhaul of our tax system remains a national priority.” Dated 04/28/13.