Tax Preparation Statistics 2026: Time & Cost

Americans spent an estimated 7.1 billion hours and $464 billion complying with the tax code in 2025, according to the National Taxpayers Union Foundation. The average Form 1040 filer now spends 13 hours and $290 to prepare a single return. About 94% of returns are e-filed, yet more than one-third of Americans still pay a professional to handle the paperwork. Self-employed filers feel it most: one study found gig workers overpay their taxes by 21% on average, largely because of missed deductions and weak recordkeeping. These 17 statistics show where the time, money, and lost refunds actually go.

Tax season is one of the largest recurring paperwork burdens in American life. Every receipt, 1099, mileage log, and donation slip has to be found, sorted, and matched to a form before a return can be filed. As income gets more complex and more people earn 1099 income, that recordkeeping load keeps growing.

This post collects 17 verifiable statistics on the time and cost of preparing taxes, who files how, and why disorganized records cost real money. It is built for freelancers, small-business owners, and anyone who dreads the annual scramble for documents.

1. Americans spent 7.1 billion hours and $464 billion on tax compliance in 2025

7.1 billion hours went into preparing 2024 taxes, costing the economy an estimated $316 billion in lost time, according to the National Taxpayers Union Foundation. Add roughly $148 billion in out-of-pocket spending on software and professional services, and the total compliance burden reaches $464 billion for the 2025 filing season. To put 7.1 billion hours in perspective, that is the equivalent of millions of full-time workers doing nothing but tax paperwork for an entire year. The Foundation notes that the year-over-year decline in hours came mostly from IRS modeling changes, not real simplification, so most taxpayers felt no actual relief. The headline takeaway is blunt: tax compliance is a national time sink, and the bulk of it is the unglamorous work of gathering and organizing documents.

Source: National Taxpayers Union Foundation - Taxpayers Will Spend 7.1 Billion Hours, $464 Billion on Tax Compliance in 2025

2. The average 1040 filer spends 13 hours and $290 on a single return

13 hours and $290 is what the typical individual Form 1040 filer now spends to prepare and file one return, per the National Taxpayers Union Foundation. That figure covers everything: gathering records, learning the rules, filling out forms, and paying for software or a preparer. Thirteen hours is more than a full workday spent on a single annual chore. The dollar cost is just as striking, since $290 is money spent simply to report income, not to reduce a tax bill. For households juggling W-2s, 1099s, childcare statements, and charitable receipts, the time disappears fast in the document-hunting phase. The lesson is that most of the burden is not the math. It is finding and assembling the paper trail that proves what you earned and what you can deduct.

Source: National Taxpayers Union Foundation - Average American Spends 13 Hours and $290 to File Taxes

3. Tax complexity costs the U.S. economy over $536 billion a year

$536 billion, or nearly 1.8% of GDP, is the annual cost of tax-code complexity, according to a Tax Foundation analysis of federal data. That total splits into roughly $388 billion in lost productivity from the 7.1 billion hours spent on compliance and about $148 billion in direct out-of-pocket costs. The Tax Foundation frames the scale vividly: the compliance burden is equivalent to millions of full-time workers doing nothing but tax paperwork all year, and it exceeds federal revenue from the corporate income tax. For an individual, that abstract number lands as hours lost and fees paid every spring. The implication is that complexity itself, not the tax owed, is a hidden cost, and better records are one of the few levers an individual can actually pull to cut their share.

Source: Tax Foundation - Tax Complexity Now Costs the US Economy over $536 Billion Annually

4. The average individual return takes 13 hours to file, but the top earners take 23

13 hours is the average time to file an individual income tax return under current law, according to the Yale Budget Lab. The burden is far from evenly spread. Tax units in the top income decile take more than 23 hours on average, while those in the bottom half of the income distribution take fewer than 13 hours. The Budget Lab attributes the gap to income composition, not wealth alone. Higher-income returns are more likely to include capital gains, business income, and rental income, all of which require heavy recordkeeping because they lack the automatic third-party reporting and withholding that wages get. The takeaway is that complexity scales with how many income streams and deductible expenses you have to document, which is exactly why self-employed and investment-heavy filers feel the pain most.

Source: Yale Budget Lab - Estimating the Time Burden of Tax Filing

5. Business filers spend 24 hours on taxes, nearly triple non-business filers

24 hours is the average time a business filer spends to meet tax requirements, compared with just 9 hours for a non-business filer, according to IRS figures cited by the Yale Budget Lab. That near-tripling captures the core problem facing the self-employed and small-business owners. Once you file a Schedule C or run a pass-through entity, you take on the job of documenting revenue and every deductible expense yourself, with no employer issuing a tidy W-2. Mileage, home-office costs, supplies, software, and client invoices all have to be tracked and substantiated. For a one-person business, those 24 hours are unpaid administrative work pulled straight from billable or revenue-generating time. The implication is clear: the more of your income that flows through a business return, the more your tax outcome depends on year-round recordkeeping rather than a last-minute filing sprint.

Source: Yale Budget Lab - Estimating the Time Burden of Tax Filing

6. Recordkeeping is the single largest chunk of tax-prep time

Recordkeeping is the most time-consuming part of preparing a return, the IRS reports. For an individual without a business, the IRS estimates about 8 hours of total burden, of which roughly 3 hours go to recordkeeping alone, with the rest split across tax planning, form completion, and other steps. In other words, before any forms are touched, the largest single activity is finding, sorting, and organizing documents. That pattern holds across taxpayer types and is why disorganized receipts and statements quietly inflate everyone's filing time. The practical takeaway is that the highest-leverage place to cut your tax-prep hours is not the filing software. It is the document pile. Keeping receipts, invoices, and statements organized and searchable throughout the year directly attacks the biggest line item in the IRS's own time estimate.

Source: IRS - Taxpayer Compliance Burden (Publication 5743)

7. About 94% of individual tax returns are now e-filed

94% of individual income tax returns were submitted electronically in 2025, the IRS reports, marking a record high for e-filing. The agency processed more than 165 million individual returns, with only about 6%, or roughly 11 million, still filed on paper. Electronic filing is now the default behavior of the American taxpayer, and paper returns are a shrinking minority. The shift matters because e-filing speeds processing and refunds, but it does not solve the harder problem upstream. Whether you file electronically or on paper, you still have to assemble the underlying documents first. Going digital at the filing stage while keeping receipts and statements in a shoebox leaves the most time-consuming step stuck in the analog era. The trend points toward a fully digital tax workflow, which only works if the source documents are digital too.

Source: IRS - National Taxpayer Advocate Annual Report (e-file processing data)

8. More than one-third of Americans pay a professional to file

37% of Americans use a professional tax preparer, according to a TaxSlayer Pro survey. Despite cheap and capable do-it-yourself software, more than a third of filers still hand the job to a human. The survey points to complexity and the fear of errors as core motivators, and that tracks with separate findings that ease of use, cost, and accuracy are the top reasons people choose their filing method at all. Paying a preparer does not remove the document burden either. Most preparers require the client to deliver organized records, receipts, and forms before they can start. The takeaway is that even outsourcing the return does not outsource the recordkeeping. The cleaner and more complete your documents, the faster and cheaper a professional engagement tends to be, since many preparers bill by the hour or by complexity.

Source: TaxSlayer Pro - More Than 30% of Americans File with Professional Tax Preparers

9. Paid preparers filed roughly 85 million electronic returns

85 million electronically filed returns were prepared and filed for a fee by paid practitioners, representing more than half of all e-filed returns in the period reported. That figure shows just how large the paid-preparation market is. Tens of millions of households decide each year that their tax situation is complicated or risky enough to justify paying someone else. The scale also underlines a quiet truth about the industry: a huge share of professional tax work is spent reconstructing clients' records from incomplete paperwork. Preparers routinely chase missing 1099s, untracked expenses, and lost receipts before they can file accurately. For the taxpayer, that translates into higher fees and slower turnaround. The implication is that the value a client brings to the table is organization, and well-kept digital records shift the engagement from data cleanup to actual tax strategy.

Source: TaxSlayer Pro - More Than 30% of Americans File with Professional Tax Preparers

10. A basic 1040 with itemized deductions averages $414 to prepare

$414 is the average professional fee to prepare a Form 1040 with Schedule A for itemized deductions, while a 1040 with the standard deduction averages $281, based on National Society of Accountants survey data adjusted to 2025 dollars. The jump from $281 to $414 quantifies what itemizing costs at the preparer's desk: roughly an extra $130 to handle the additional documentation behind mortgage interest, state taxes, charitable gifts, and medical expenses. That premium exists because itemized returns demand more receipts, more substantiation, and more time. The figure reframes a familiar tradeoff. Itemizing only pays off if your deductions clear the standard deduction by enough to cover both the tax savings and the higher prep fee. For filers sitting near the line, organized, searchable records are what make itemizing worth the effort instead of an expensive paperwork exercise.

Source: WalletHacks - How Much Should Tax Preparation Cost (NSA fee data)

11. CPAs charge about $280 for a base individual return

$280 is the average fee a CPA charges to prepare a base Form 1040 with Schedules 1 through 3, while enrolled agents average $228 and non-credentialed preparers about $185, according to the 2025 NATP Fee Study. The spread reflects credentials and the complexity a preparer is equipped to handle, but every tier shares one assumption: the client supplies usable records. NATP's data is drawn from working tax professionals, which makes it a reliable read on real market rates. For a freelancer or small-business owner, these numbers set a baseline. Add a Schedule C, rental income, or multiple state filings and the fee climbs from there. The practical implication is that fees scale with both complexity and disorganization. Handing a preparer clean, categorized documents instead of a folder of loose receipts is one of the few ways a client can keep the bill closer to the base rate.

Source: WalletHacks - How Much Should Tax Preparation Cost (NATP 2025 Fee Study)

12. A Schedule C business return adds about $245 in prep fees

$245 is the average fee to prepare a Schedule C for a sole proprietorship or single-member business, per National Society of Accountants survey data adjusted to 2025 dollars. That fee sits on top of the base individual return, so a self-employed filer is often paying for the 1040 plus the Schedule C plus any state forms. The Schedule C is where business income and every deductible expense get reported, which makes it the most document-intensive form many individuals will ever file. Each deduction claimed has to be backed by a receipt, invoice, or log that survives IRS scrutiny. The cost is a direct function of how organized the underlying records are. A business owner who tracks expenses year-round hands the preparer a clean ledger. One who does not pays for the preparer's time to reconstruct it, and risks leaving legitimate deductions unclaimed.

Source: WalletHacks - How Much Should Tax Preparation Cost (NSA fee data)

13. Gig workers overpay their taxes by 21% on average

21% is the average tax overpayment among gig workers, according to a Keeper study of 205 real 2018 tax returns from independent contractors across 16 U.S. cities. The dollar impact scales with income: a side hustler earning $3,000 overpaid by about $200, while someone with $25,000 in contracting income overpaid by roughly $1,550 a year. The cause was not ineligibility but missed deductions tied to poor recordkeeping. Phone bills were missed by 23% of participants, software subscriptions by 21%, and car insurance by 19%. Blue-collar gig workers overpaid the most, at 25%. The finding is a warning for anyone with 1099 income: the deductions exist, but they only count if you have the receipts to claim them. Money left on the table here is money paid to the IRS that the law never required, lost purely to disorganization.

Source: Keeper - Gig Workers Overpay on Taxes by 21%

14. Around 40 million freelancers overpay by an average of $1,249 a year

$1,249 is the average annual tax overpayment for freelancers, affecting roughly 40 million Americans, according to Keeper's research. Multiplied out, that points to tens of billions of dollars in overpaid taxes every year, paid by people who often do not consider themselves business owners at all. The driver is the same one our freelance statistics breakdown returns to repeatedly: independent earners shoulder a self-employment tax and a documentation burden that wage workers never see, and missed write-offs are the predictable result. A forgotten subscription here and an untracked mileage trip there compound across a year into a four-figure overpayment. The takeaway is that for the self-employed, recordkeeping is not bureaucracy. It is the direct mechanism by which deductions get captured, and the difference between a $1,249 overpayment and an accurate return often comes down to whether the receipts were saved.

Source: Keeper - The Freelance Tax Tragedy

15. 90% of small-business owners say federal taxes affect daily operations

90% of small-business owners say federal taxes have some impact on their day-to-day operations, and one in three cite a significant impact, according to the NSBA Small Business Taxation Survey. Most owners spend more than 20 hours a year dealing with federal taxes even though the vast majority pay an external practitioner. Crucially, the survey found that administrative complexity, not the financial cost of the tax itself, is the largest burden. With 83% of small businesses structured as pass-through entities, that paperwork lands on the owner's personal return. The pattern echoes our small business statistics roundup: the time tax steals from running an actual business is a recurring complaint. The implication is that the binding constraint for owners is not the tax bill but the year-round work of tracking, substantiating, and producing the records that compliance demands.

Source: NSBA - 2024 Survey on Taxation and Small Business

16. New tax law made more than 100 changes filers must navigate

More than 100 changes to the tax code arrived with the One Big Beautiful Bill Act, the National Taxpayer Advocate reported in the 2025 Annual Report to Congress. Some take effect in 2026, but key provisions were made retroactive to the start of 2025 and must be reported on returns filed this season. The Advocate warned that the new deductions and benefits carry complex eligibility rules, income thresholds, and phaseouts that will be hard for taxpayers to understand and for the IRS to administer accurately. The expected result is more confusion, more calls to the IRS, and more errors that delay refunds. The takeaway for filers is that the rules are getting more complicated, not less. When the law shifts under your feet, complete and well-organized records are the best defense against missing a new benefit or triggering an avoidable mistake.

Source: IRS - National Taxpayer Advocate Delivers 2025 Annual Report to Congress

17. Audit rates are low, but documentation is still the deciding factor

About 0.4% of individual returns were examined, the IRS reports, and recent comprehensive data showed audit coverage near 0.3% for returns with positive income. The odds of any single return being audited are low, but the rate is uneven. Coverage rises sharply at the top, reaching double digits for returns reporting $10 million or more in total positive income, while certain lower-income returns claiming refundable credits also draw scrutiny. The number that matters most, though, is not the audit probability. It is whether you can substantiate what you filed if the letter ever arrives. An audit or even a routine IRS notice turns entirely on documentation: receipts, mileage logs, and statements that prove each deduction. The implication is that low audit odds are no reason to skip recordkeeping, because the cost of being unable to back up a claim falls entirely on the taxpayer.

Source: U.S. GAO - Trends of IRS Audit Rates and Results for Individual Taxpayers by Income

What These Numbers Reveal About Tax Preparation

Read together, these statistics tell one story: the hardest part of taxes is not the math, it is the documents. The IRS itself names recordkeeping as the single largest activity in preparing a return, and the 7.1 billion hours and $464 billion spent each year are dominated by the work of finding and organizing paperwork. E-filing solved the submission step for 94% of filers, but it did nothing for the document-gathering step that comes first.

For freelancers and small-business owners, the stakes are higher and more personal. Business filers spend 24 hours to non-business filers' 9, gig workers overpay by 21%, and 40 million freelancers leave an average of $1,249 on the table every year. Almost all of that loss traces back to deductions that were legitimate but unprovable because the receipts were missing. Disorganized records do not just cost time. They cost real refund dollars and inflate the fees preparers charge.

The trajectory points toward a fully digital tax workflow, and the bottleneck is the source documents. As the tax code grows more complex with 100-plus new changes, the filers who keep receipts, invoices, and statements digitized and searchable year-round will spend less time, pay lower fees, and claim more of what they are owed. The rest will keep repeating the spring scramble.

The biggest, most controllable cost in tax preparation is not the tax itself, it is the time and lost deductions caused by disorganized records.

Turn the Spring Paperwork Scramble Into a Searchable Archive

The data is consistent across every source: recordkeeping is where tax-prep time and lost refunds come from. Receipts fade, 1099s get misfiled, and mileage logs go untracked, then deductions vanish and preparer fees climb. The fix is not a once-a-year cleanup. It is capturing each document the moment it lands, so tax season becomes a search instead of a hunt.

Filewise is the fast, reliable PDF and document scanner built for exactly that job. Turn receipts, invoices, and tax forms into sharp, searchable, professional multi-page PDFs in seconds, then use on-device OCR to find any scan by keyword when it is time to file or to answer an IRS notice. It all runs on-device and works offline, with Face ID to keep your financial paperwork locked, so your records are organized, professional, and searchable year-round instead of buried in a shoebox.

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Frequently Asked Questions

How long does it take to prepare a tax return?

The average individual Form 1040 filer spends about 13 hours preparing and filing a single return, according to the National Taxpayers Union Foundation and the Yale Budget Lab. Business filers spend far more, about 24 hours on average per IRS data, compared with 9 hours for non-business filers. Recordkeeping is consistently the most time-consuming step.

How much does it cost to have taxes professionally prepared?

A Form 1040 with the standard deduction averages about $281 to prepare, rising to roughly $414 with itemized deductions on Schedule A, based on National Society of Accountants data adjusted to 2025 dollars. The 2025 NATP Fee Study puts a base individual return at about $280 for a CPA and $228 for an enrolled agent. A Schedule C business return adds roughly $245.

What percentage of tax returns are filed electronically?

About 94% of individual income tax returns were e-filed in 2025, the IRS reports, with only around 6%, or roughly 11 million returns, filed on paper. That is a record high for electronic filing, though e-filing only addresses submission, not the document-gathering that comes first.

Why do self-employed people overpay their taxes?

A Keeper study of 205 returns found gig workers overpay by 21% on average, and around 40 million freelancers overpay by about $1,249 a year. The cause is rarely ineligibility. It is missed deductions tied to poor recordkeeping, such as unclaimed phone bills, software subscriptions, and mileage, which can only be deducted if the receipts are kept.