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Study Shows Annual Cost of Complying with Federal Income Tax Is $125 Billion WASHINGTON, Nov. 18, 2000 (SmartPros) Complying with federal income tax laws costs individuals and businesses in the U.S. about $125 billion per year, according to a report by the Tax Foundation, a nonprofit group that monitors fiscal policy at the federal, state and local levels. The cost to read the rules and fill out the forms necessary to comply with federal income tax equals a 12-cent compliance burden for every dollar the federal income tax collects, the Tax Foundation reported. The study, Tax Foundation Background Paper No. 35 by economist J. Scott Moody, was released at the Tax Foundation conference on corporate tax shelters Thursday at the Four Seasons Hotel. The foundation calls the $125 billion figure "an extremely cautious estimate" of the compliance burden, because the study focuses only on the paperwork requirements that taxpayers must meet, and excludes the opportunity cost of filling out tax forms rather than working, and the cost of the IRS, the Tax Court and all the litigation that taxpayers pay for during disputes with the agencies. Based on IRS estimates of the number of hours required to fill out each form, taxpayers spend 4.3 billion hours a year on income tax compliance, or the equivalent of a work force of over 2,083,000 people, according to the report. -- SmartPros News Staff Send comments to information@smartpros.com 2000, Smartpros Ltd. All Rights Reserved. |
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