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Estimating the Costs of Filing Tax Returns and the Potential Savings from Policies Aimed at Reducing These Costs

In: Tax Policy and the Economy, Volume 35

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  • Youssef Benzarti
Abstract
This paper estimates the cost of filing taxes and assesses several policy proposals aimed at reducing these costs. Using US tax returns, a quasi-experimental method and additional extrapolations based on survey evidence, I uncover three main findings. First, filing costs are large and have been steadily increasing over time. Second, part of this increase in filing costs can be attributed to an increase in the number of schedules filed per taxpayer. Third, pre-populating tax returns and offering free filing options can result in substantial cost savings for taxpayers.
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Suggested Citation

  • Youssef Benzarti, 2020. "Estimating the Costs of Filing Tax Returns and the Potential Savings from Policies Aimed at Reducing These Costs," NBER Chapters, in: Tax Policy and the Economy, Volume 35, pages 55-85, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:14524
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    References listed on IDEAS

    as
    1. Tazhitdinova, Alisa, 2018. "Reducing evasion through self-reporting: Evidence from charitable contributions," Journal of Public Economics, Elsevier, vol. 165(C), pages 31-47.
    2. Harju, Jarkko & Matikka, Tuomas & Rauhanen, Timo, 2019. "Compliance costs vs. tax incentives: Why do entrepreneurs respond to size-based regulations?," Journal of Public Economics, Elsevier, vol. 173(C), pages 139-164.
    3. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
    4. Guyton, John L. & O'Hare, John F. & Stavrianos, Michael P. & Toder, Eric J., 2003. "Estimating the Compliance Cost of the U.S. Individual Income Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(3), pages 673-688, September.
    5. Blumenthal, Marsha & Slemrod, Joel, 1992. "The Compliance Cost of the U.S. Individual Income Tax System: A Second Look After Tax Reform," National Tax Journal, National Tax Association;National Tax Journal, vol. 45(2), pages 185-202, June.
    6. Blumenthal, Marsha & Slemrod, Joel, 1992. "The Compliance Cost of the U.S. Individual Income Tax System: A Second Look After Tax Reform," National Tax Journal, National Tax Association, vol. 45(2), pages 185-202, June.
    7. Youssef Benzarti, 2020. "How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 38-57, November.
    8. Joel Slemrod & Jon Bakija, 2008. "Taxing Ourselves, 4th Edition: A Citizen's Guide to the Debate over Taxes," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262693631, April.
    9. Dina Pomeranz, 2015. "No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax," American Economic Review, American Economic Association, vol. 105(8), pages 2539-2569, August.
    10. Nicky J. Welton & Howard H. Z. Thom, 2015. "Value of Information," Medical Decision Making, , vol. 35(5), pages 564-566, July.
    11. Henrik Jacobsen Kleven & Martin B. Knudsen & Claus Thustrup Kreiner & Søren Pedersen & Emmanuel Saez, 2011. "Unwilling or Unable to Cheat? Evidence From a Tax Audit Experiment in Denmark," Econometrica, Econometric Society, vol. 79(3), pages 651-692, May.
    12. Christian Gillitzer & Peer Ebbesen Skov, 2018. "The use of third-party information reporting for tax deductions: evidence and implications from charitable deductions in Denmark," Oxford Economic Papers, Oxford University Press, vol. 70(3), pages 892-916.
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    Cited by:

    1. Tobias Hauck & Luisa Wallossek, 2021. "Automatische Einkommensteuererstattungen zur Entlastung niedriger Einkommen [Automatic Income Tax Refunds to Relieve Low Incomes]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(12), pages 956-959, December.
    2. Siamand Hesami & Hatice Jenkins & Glenn P. Jenkins, 2024. "Digital Transformation of Tax Administration and Compliance: A Systematic Literature Review on E-Invoicing and Prefilled Returns," Development Discussion Papers 2023-14, JDI Executive Programs.

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    JEL classification:

    • H0 - Public Economics - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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