tax cost

Tax compliance costs $409 billion a year

By Bankrate

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!


The Internal Revenue Service is up front about the hassles of filing your annual tax return. In the instructions for Form 1040, the tax agency breaks out its estimates of taxpayer filing burden.

According to the IRS, it takes the average taxpayer 13 hours to fulfill his or her annual filing responsibility. That covers filling out the forms, records keeping, tax planning and other miscellaneous tax tasks.

Now the Tax Foundation has taken a macro look at the compliance costs of IRS regulations.

Billions of hours and dollars

The Washington, D.C.-based tax policy think tank says Americans will spend more than 8.9 billion hours complying with IRS tax filing requirements in 2016. And those hours will cost the U.S. economy $409 billion this year, says the Tax Foundation.

While the ever-growing tax code is a major factor, an equally annoying problem is the amount of regulations the IRS issues in connection with those tax laws.

“The tax statutes passed by Congress are only the tip of the iceberg when it comes to tax complexity,” says Tax Foundation President Scott Hodge in the report. “There are roughly 7.7 million words of tax regulations, promulgated by the IRS over the last century, which clarify how the U.S. tax statutes work in practice. On top of that, there are almost 60,000 pages of tax-related case law, which are indispensable for accountants and tax lawyers trying to figure out how much their clients actually owe.”

Or, as the old Capitol Hill saying goes, the tax code is the ultimate “keep tax professionals employed” law.

A big business burden

The Tax Foundation study, using data from the Office of Information and Regulatory Affairs and the Bureau of Labor Statistics, calculated the productivity costs of IRS paperwork.

Topping the list of 50 forms is the business income tax return.

Companies spend 2.8 billion hours completing their tax forms at a total annual cost of more than $147 billion.

Individual taxpayers burdened, too

We individual taxpayers are close behind. Filing of individual tax returns takes more than 2.6 billion hours, coming to a dollar cost of $98.7 billion.

Rounding out the top 5 most costly tax filings are tax returns for an S corporation, Form 4562 to claim depreciation and amortization (personal aside: the first time I filed this form in pre-software days, I got so frustrated I cried) and employers’ quarterly federal tax returns.

Also in the top 10 are filings for estates and trusts and Schedule C, which is filed by entrepreneurs operating their own businesses.

Time is tax money

“Time is the most valuable thing we have, and we should not be forced to waste it complying with IRS forms,” says Hodge, who encourages Congress to keep the Tax Foundation findings in mind when considering tax reform.

Do you feel overwhelmed when you do your taxes? How long does the process take? Or do you hand your tax duties over to a professional?

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

State tax cost of Tom Brady suspension

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!


The National Football League has spoken. Tom Brady will sit out the first four games of the 2015 season for his role in the improperly inflated footballs scandal during last season’s playoffs.

The punishment for Deflategate, as the football air pressure incident has become known, is based on findings in the 243-page Wells Report that it is “more probable than not” that the New England Patriots’ star quarterback violated league rules.

Jock tax cost

Patriots’ fans, as well as the millions who play fantasy football, are freaking out about the loss of such a valuable player for a quarter of the NFL’s 2015 regular season.

So are Massachusetts and New York tax collectors.

If Brady doesn’t win his expected appeal of the suspension, he won’t play in two home games in Foxborough, Massachusetts. He’ll miss road games in Buffalo, New York, and Arlington, Texas.

Three of those four games are in states that collect income taxes. And jock taxes, the share of well-paid athletes’ earnings that states and some cities get when players come to play games, provide a nice chunk of change for state treasuries.

Brady’s 2015 NFL base salary of $8 million means he will lose around $500,000 per game.

That’s $1 million that won’t face taxes from home games in Massachusetts against the Pittsburgh Steelers and Jacksonville Jaguars.

New York’s tax collector will lose its part of half a million dollars that Brady won’t get for the Buffalo Bills home game.

Only the match-up between the Patriots and Dallas Cowboys is immaterial for state tax purposes since Texas has no income tax.

And we can’t forget Uncle Sam. The U.S. Treasury also will take a hit from the $2 million that Brady won’t be paid.

Tougher on states than Brady?

While $2 million is a lot of money, the punishment isn’t really that big of a deal to Brady, a two-time NFL most valuable player who earned his fourth Super Bowl ring in February.

His NFL salary is only a small part of his overall net worth, which estimates at $120 million. Plus, Brady married up financially. His wife, Brazilian super model Gisele Bundchen, is estimated to be worth $320 million.

Struggling states, however, will miss every tax dollar they can’t collect from Brady this fall.

Maybe those state tax officials will file a friend of the NFL appellate hearing brief in support of leniency for Brady.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.


Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.