Despite legislative changes aimed at reforming the federal tax framework, the sheer magnitude of America’s tax code continues to exact a heavy toll on the national economy. According to recent estimates from the White House Office of Information and Regulatory Affairs (OIRA), U.S. taxpayers will spend nearly 6.9 billion hours complying with Internal Revenue Service (IRS) filing and reporting requirements in 2026. When combined with billions in out-of-pocket expenses, the total annual compliance burden now exceeds $544 billion, representing more than 1.7 percent of the nation’s gross domestic product (GDP).
While the One Big Beautiful Bill Act (OBBBA) modified various sections of the federal tax code following its enactment, it largely preserved the underlying structure and complexity of the system. The direct financial demands of the federal government are substantial, consuming roughly $5.2 trillion—or 17.3 percent of GDP—in federal taxes as of fiscal year 2025. Economists at the Organisation for Economic Co-operation and Development (OECD) have consistently noted that the federal tax system’s heavy reliance on individual and corporate income taxes creates some of the most severe obstacles to broader economic growth.
Beyond direct tax liabilities, however, lies the hidden drag of administrative complexity. Complying with a Byzantine regulatory framework requires billions of hours of paperwork. In fiscal year 2025, Americans filed 271.4 million tax returns. Approximately 65 percent of these filings—totaling 176.5 million—were individual and corporate income tax returns, while another 34.1 million comprised employment tax returns.
Measuring Taxpayers’ Compliance Burden
The administrative demands of the federal tax code translate into an enormous expenditure of human capital. The 6.9 billion hours required for tax compliance in 2026 equate to the labor of 3.32 million full-time workers. To put that figure in perspective, it is roughly equivalent to the entire population of Chicago and stands at nearly 35 times the size of the workforce employed by the IRS itself during fiscal year 2025. These individuals would effectively spend an entire year doing nothing other than processing tax paperwork.
Under the Paperwork Reduction Act of 1980 (PRA), the IRS is legally obligated to estimate the time and out-of-pocket expenditures required for taxpayers to complete various forms. Over the decades, the agency has refined its methodology. While early assessments relied heavily on paper-filing surveys from the 1980s, the modern estimation model incorporates comprehensive surveys of individual and business taxpayers alongside detailed IRS administrative data.
The IRS defines taxpayer compliance burden strictly as the time and money spent fulfilling filing responsibilities. This encompasses recordkeeping, tax planning, gathering materials, learning about evolving laws, and completing returns, alongside out-of-pocket costs like tax software, third-party preparation fees, printing, and postage. It explicitly excludes a taxpayer’s actual tax liability, psychological costs, or the broader economic inefficiencies caused by sub-optimal financial choices driven by tax incentives. For 2026, the IRS estimates these out-of-pocket expenses will reach $157 billion, though advocacy groups suggest this figure may underestimate the true financial footprint because many minor forms are assigned a zero cost.
The Price of Our Time Totals over $387 Billion Annually
Every hour spent navigating complex tax instructions represents a lost opportunity. Parents sacrifice time with their families, and entrepreneurs divert attention away from expanding their enterprises. Economists refer to these sacrifices as opportunity costs. By applying hourly wage and benefit data compiled by the Bureau of Labor Statistics (BLS), analysts can assign a tangible monetary value to the time spent by individuals and businesses.
For individual income tax forms, calculations apply an hourly compensation cost of $47.55, combining the average hourly wage across all occupations with private-sector benefit costs. For business-related and complex filings—such as trust and estate returns or intricate depreciation schedules—the calculation utilizes an hourly compensation cost of $59.57, blending the average wage for accountants and auditors with standard private-sector benefits.
Valued in these terms, the 6.9 billion hours required for tax compliance impose an estimated $37.5 billion in lost annual productivity. Combined with $157.1 billion in out-of-pocket expenses, the aggregate cost of tax compliance climbs to $544.6 billion. This total exceeds the revenue generated by the federal corporate income tax and is more than 28 times the entire operating budget of the IRS.
Much of the Tax Burden Falls on Businesses
While individual taxpayers spend more than 1.9 billion hours on personal tax forms at an annual cost of $142.4 billion, individuals account for roughly 26 percent of total compliance costs and about 28 percent of total hours. The vast majority of the administrative burden falls squarely on the business community.
The total compliance burden on U.S. businesses is distributed across a myriad of filings. Corporate income tax returns alone cost more than $130.2 billion to fulfill. Employment tax returns add another $46.1 billion, while maintaining compliance schedules for asset depreciation accounts for an additional $26.7 billion. Both business income and depreciation compliance costs have risen compared to prior reporting periods.
Disparities in time commitments underscore the heavy administrative weight carried by corporations. The IRS estimates it takes an average of 12 hours to complete the primary individual tax filing, Form 1040—roughly 8 hours for taxpayers without business income and 21 hours for those with side business activities. In contrast, taxable corporations face an average compliance time of 90 hours for Form 1120. While smaller corporations average 40 hours, large corporations report an average expenditure of 610 hours per return, amounting to more than 15 full-time workweeks dedicated solely to tax filing requirements.
Requirements for Cryptocurrency Transactions Are the Most Burdensome
Certain regulatory reporting mandates demonstrate the profound administrative costs associated with new legislative enactments. Form 1099-B, which covers proceeds from broker and barter exchange transactions, has become exceptionally time-consuming. Driven largely by provisions implemented under the Infrastructure Investment and Jobs Act (IIJA), compliance hours for related filings surged to nearly 2.2 billion hours at a cost of just over $130 billion, making it the single most demanding form in the federal inventory.
The Joint Committee on Taxation had originally projected that these IIJA provisions would generate approximately $28 billion in new tax revenue over a decade—amounting to less than $3 billion annually—which is a fraction of the compliance burden placed on the economy. The legislation expanded reporting rules for digital assets, broadening the definition of a broker to encompass cryptocurrency exchange operators and requiring businesses to report digital asset transactions exceeding $10,000.
Although subsequent transitions have shifted digital asset reporting toward newly established forms like Form 1099-DA, the sheer scale of the initial estimates highlights how regulatory requirements can outstrip projected revenues by orders of magnitude.
The IRS Is the Primary Source of Regulatory Costs in America
Data from OIRA indicates that tax compliance now accounts for 60 percent of the 11.49 billion total hours Americans spend complying with federal paperwork, and 78 percent of the $201.5 billion in government-wide out-of-pocket regulatory costs.
These figures demonstrate that technological advancements—such as electronic filing and commercial tax software—have not successfully reversed the upward trajectory of administrative complexity. While roughly 94 percent of individual returns are prepared using software and 83 percent are filed electronically, efficiency gains from computing speeds have been consistently outpaced by the compounding intricacy of the tax code.
The latest data continues this long-term trend. The total compliance estimate of $544.6 billion marks an increase from the previous year’s $536.1 billion. Interestingly, the total time burden decreased slightly from 7.09 billion to 6.90 billion hours, but the dollar value of that time remained steady due to rising average hourly compensation. The net increase was driven entirely by out-of-pocket expenses, which climbed by about $9.1 billion.
The data also begins to capture early administrative effects of the OBBBA. New compliance categories, such as filings associated with "Trump Account" provisions, have introduced millions of hours of additional paperwork, while applications for Employer Identification Numbers now rank among the most burdensome collections. However, numerous newly enacted deductions do not yet possess standalone entries, suggesting that overall compliance figures will likely shift further as additional OBBBA provisions take full effect during subsequent filing seasons.
