National Taxpayers Union Foundation (NTUF) has released an update to its annual tax complexity study, which uses IRS data to estimate the compliance and time burdens associated with filing income taxes. For the 2024 tax filing season, Americans spent 7.9 billion hours complying with the tax code—the highest since 2018. The opportunity cost of this time, plus out-of-pocket expenses, totals $475 billion.
This is an upward revision from NTUF’s estimate earlier this year. The IRS significantly revised its estimate of compliance costs associated with the 2021 Infrastructure Investment and Jobs Act, a bipartisan infrastructure law. The most significant increase was tied to Form 1099-B: Proceeds from Broker and Barter Exchange Transactions.
As NTUF noted in its most recent tax complexity report, this form, which brokers use to report capital gains and losses, has long been listed as the worst tax form by tax preparers. Section 80603 of the Infrastructure Investment and Jobs Act expanded the definition of a broker, leading to an increase of 100 million form filings.
Form 1099-B now imposes the second highest hourly compliance burden, behind only the Individual Income Tax forms. This burden could be further compounded, as a draft for a new Form 1099-DA for brokers dealing with digital assets was recently released. The compliance burden for Form 1099-DA could be as much as four times higher than the revised estimate for Form 1099-B. NTUF filed comments urging the IRS to reconsider Form 1099-DA and its approach to digital asset taxation.
NTUF Vice President of Research Demian Brady writes:
The rising complexity and burden of tax compliance in recent years highlight the urgent need for reform. While previous measures like the 2017 Tax Cuts and Jobs Act succeeded in reducing the burden on taxpayers, recent spikes indicate that more comprehensive solutions are necessary. The sharp increase in compliance costs, exacerbated by inflation and the growing complexity of tax forms like the 1099-B and the proposed 1099-DA, underscores the inefficiencies within the current system.
Next year, Congress has an opportunity to protect taxpayers from significant tax hikes resulting from the expiration of many provisions of the Tax Cuts and Jobs Act (TCJA). Lawmakers can also simplify the tax code through policies that make it easier to understand and comply with tax law, thus creating a more transparent, efficient, and taxpayer-friendly system.
For more information on digital asset taxes or the tax compliance burden more broadly, speak with NTUF Vice President of Research Demian Brady, please contact NTUF Communications Manager Courtney Manley at courtney.manley@ntu.org.