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HomeIllinois NewsThe Tax Cuts Simplified Tax Filing Process for Millions of Households

The Tax Cuts Simplified Tax Filing Process for Millions of Households

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Sorting through the noise of the tax cuts and jobs act

How much did tax reform save in compliance costs? Erica York and Alex Muresianu write:

The simplification of the tax code will lead to economic savings thanks to less time spent filing. Using estimates of how many hours it takes taxpayers to comply with certain forms, we can estimate the value of time saved by certain reforms made by the TCJA. Specifically, the reduction in filers owing AMT liability and the simplified process of filing individual income taxes could greatly reduce compliance costs for certain households.

In tax year 2015, 10.3 million forms were filed for the AMT, though only 4.5 million ended up owing any AMT liability. It is estimated that only about 200,000 will owe the AMT under new thresholds; however, approximately 1 million individuals may still need to file the forms to determine whether they owe. According to the Internal Revenue Service Taxpayers Advocate Service, filers who face the AMT spend almost twice as long complying with the tax code than filers who do not face the AMT. In 2017, the average total time spent filing a Form 1040 was 15 hours. Using this information, the decline in AMT filers translates to approximately 135 million hours saved, or in dollar terms, $4.6 billion.

Additionally, the doubling of the standard deduction and subsequent move away from the itemized deduction will also result in tax compliance savings. The IRS has estimated that the average time to complete an individual tax return will decrease by 4 to 7 percent. This would reduce the time of 15 hours spent filing Form 1040 to an average between 13.95 and 14.4 hours per Form 1040.If we expect 150 million individual income tax filers, this translates into a total time savings anywhere from 90 million to 157.5 million hours. Converting this to dollar terms, savings could range from $3.1 billion to $5.4 billion. [Internal citations omitted.]

[Erica York and Alex Muresianu, “The Tax Cuts and Jobs Act Simplified the Tax Filing Process for Millions of Households,” Tax Foundation, August 7]

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