4972 Tax on Lump-Sum Distributions

Page 80 of 86 of Instructions 1040

16:33 - 21-SEP-2006

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Estimates of Taxpayer Burden
The table below shows burden estimates by form
type and type of taxpayer. Time burden is further
broken out by taxpayer activity. The largest
component of time burden for all taxpayers is
recordkeeping, as opposed to form completion
and submission. In addition, the time burden
associated with form completion and submission
activities is closely tied to preparation method
(self-prepared without software, self-prepared
with software, and prepared by paid preparer).
Time spent and out-of-pocket costs are estimated separately. Out-of-pocket costs include
any expenses incurred by taxpayers to prepare
and submit their tax returns. Examples of
out-of-pocket costs include tax return preparation and submission fees, postage, tax preparation software costs, photocopying costs, and
phone calls (if not toll-free).

Both time and cost burdens are national averages and do not necessarily reflect a “typical”
case. For instance, the average time burden for
all taxpayers filing a 1040, 1040A, or 1040EZ
was 24.2 hours, with an average cost of $207 per
return. This average includes all associated
forms and schedules, across all preparation
methods and all taxpayer activities. Taxpayers
filing Form 1040 had an average burden of about
30 hours, and taxpayers filing Form 1040A and
Form 1040EZ averaged about 11 hours. However, within each of these estimates, there is
significant variation in taxpayer activity. Similarly, tax preparation fees vary extensively depending on the taxpayer’s tax situation and
issues, the type of professional preparer, and the
geographic area.

The data shown are the best estimates available as of September 20, 2006, from tax returns
filed for 2005. The method used to estimate taxpayer burden incorporates results from a taxpayer burden survey conducted in 2000 and
2001. The estimates are subject to change as new
forms and data become available. The estimates
do not include burden associated with post-filing
activities. However, operational IRS data indicate that electronically prepared and e-filed returns have fewer errors, implying a lower overall
post-filing burden.
If you have comments concerning the time
and cost estimates below, you can contact us at
either one of the addresses shown under We
Welcome Comments on Forms on page 79.

Estimated Average Taxpayer Burden for Individuals by Activity
The average time and costs required to complete and file Form 1040, Form 1040A, Form 1040EZ, their schedules, and
accompanying forms will vary depending on individual circumstances. The estimated averages are:
Average Time Burden (Hours)
Major Form Filed or
Type of Taxpayer
All taxpayers . . . . . . . . . .
Major forms filed
1040 . . . . . . . . . . . . .
1040A & 1040EZ . . .
Type of taxpayer
Nonbusiness* . . . . . .
Business* . . . . . . . . .

Percentage Total
of Returns Time

Record
Keeping

Tax
Planning

Form
Form
All
Completion Submission Other

Average
Costs

100

24.2

14.6

3.4

3.3

0.5

2.5

$207

68
32

30.3
11.1

19.0
5.0

4.0
1.9

3.7
2.4

0.5
0.5

3.1
1.3

269
72

72
28

13.2
52.2

5.8
37.0

2.6
5.4

2.9
4.3

0.5
0.5

1.5
5.1

103
470

* You are a “business” filer if you file one or more of the following with Form 1040: Schedule C, C-EZ, E, or F or Form 2106 or 2106-EZ. You are a
“nonbusiness” filer if you did not file any of those schedules or forms with Form 1040.

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