Americans will spend 6.9 billion hours meeting IRS tax filing requirements in 2026, costing roughly $387 billion in lost productivity, according to a new analysis from the Tax Foundation. When combined with an additional $157 billion in out-of-pocket expenses—software, preparers, printing, and postage—total compliance costs reach more than $544 billion, exceeding 1.7 percent of GDP. The report highlights how Byzantine tax regulations impose enormous burdens on the economy, with businesses bearing the majority of the load due to complex forms and reporting mandates.
The time required to comply with tax rules equals 3.32 million full-time workers doing nothing but paperwork for an entire year—more than Chicago's population and nearly 35 times the IRS workforce employed in fiscal year 2025. Individual and corporate income tax returns accounted for about 176.5 million of the 271.4 million total returns filed in fiscal 2025, while employment tax returns comprised another 34.1 million. Individuals account for roughly 26 percent of total compliance costs (about $142.4 billion across more than 1.9 billion hours), meaning businesses shoulder the remaining three-quarters. The IRS estimates it takes 12 hours on average to complete the main individual form, Form 1040—8 hours for filers without business income and 21 hours for those with business income. By contrast, corporations face an average of 90 hours to comply with Form 1120, with small corporations requiring 40 hours and large corporations needing 610 hours—more than 15 full-time weeks.
The report finds that cryptocurrency reporting requirements have become the single most burdensome tax regulation. Form 1099-B, used for reporting proceeds from broker and barter exchange transactions, required nearly 2.2 billion hours in 2022 at a cost exceeding $130 billion, driven largely by new digital asset rules in the bipartisan Infrastructure Investment and Jobs Act. According to the Joint Committee on Taxation, these provisions were projected to raise about $28 billion over a decade—less than $3 billion annually—a small fraction of the compliance burden they impose. Tax compliance now represents 60 percent of the 11.49 billion total hours Americans spend on all federal paperwork and 78 percent of the $201.5 billion government-wide out-of-pocket regulatory costs, making the IRS the primary source of regulatory expenses nationwide.
The $544.6 billion estimate marks an increase of roughly $8.5 billion from last year's $536.1 billion figure, though the composition reveals a noteworthy shift. Total hours actually fell by about 190 million, from 7.09 billion to 6.90 billion, but the dollar value of that time held essentially steady because average hourly compensation rose over the same period. The entire net increase comes from out-of-pocket costs, which climbed approximately $9.1 billion. This year's data begins to reflect the One Big Beautiful Bill Act, signed into law on July 4, 2025, with a new "Trump Account" election adding roughly 64.9 million hours or $3.9 billion in compliance burden. However, many OBBBA provisions aren't yet incorporated, and the report notes that the 1099-B estimate hasn't been updated since April 2024, predating the shift of digital asset reporting to Form 1099-DA—meaning next year's totals could look substantially different.
The report concludes that advances in technology haven't prevented compliance burdens from rising steadily decade after decade, with efficiency gains from software and electronic filing proving "no match for tax complexity." While 94 percent of individual federal returns are now prepared using software and 83 percent filed electronically, costs continue climbing. The authors argue that lawmakers should weigh complexity when changing the tax code, particularly as more OBBBA provisions take effect in future filing seasons. Total compliance costs now exceed what the federal government collects through corporate income taxes and surpass the IRS's own annual budget by more than 28 times.