Taxes are stressful for everyone. Taxpayers worry that they’ve paid too much by missing key deductions or they’ve paid too little and will face audits and penalties. Tax law underwent major changes with the passage of 2017’s Tax Cuts and Job Act – and those changes are still being felt.
Here are some of the most interesting and relevant income tax statistics from the past few years. Let’s see if we can spot some trends or useful data points.
Income Tax Stats – Editor’s Choice
- More than half of Americans feel that they pay the right amount of taxes
- Around 45% of US households don’t pay federal income taxes
- Electronically filed tax returns have an error rate of only 0.5%
- Back in 2016, the top 1% of American taxpayers paid more income taxes than the bottom 90%
- Tax evasion costs the United States $458 billion per year
- The US tax code is more than 10 million words long
- 44% of taxpayers are worried about tax system complexity
- In 2019, 65% of American taxpayers expected a refund
US Tax Data: A Complex System
1. The federal tax code is more than 10 million words long.
The tax code consists of two parts: the 2,412,000-word Internal Revenue Code and federal tax regulations that add 7,655,000 words. And that’s not counting the substantial body of tax-related law that goes hand-in-hand with the code.
2. 44% of taxpayers say they worry about the complexity of the tax system.
(Pew Research Center)
Taxpayer statistics reveal different attitudes according to the amount people earn. Among Americans who earn more than $100,000, 55% say they find the tax system too complex. Concern drops to 33% among those who earn $30,000 or less.
3. 72% of low-income Americans don’t know that they are entitled to free tax-filing services.
Income tax stats show that most Americans are unaware of MyFreeTaxes.com, a United Way website that prepares and files taxes for anyone who earns less than $66,000. The site handles both state and federal taxes, no matter how complex, free of charge.
Surveys show that half of Americans earning $62,000 or less per year do their own taxes, and 29% pay someone else to do them, or use tax-filing software. Only 40% of respondents knew about the child tax credit, while fewer than six in 10 knew about the earned income tax credit. Although respondents typically received smaller tax refunds than they were entitled to, half reported that they don’t find tax preparation stressful. Maybe ignorance really is bliss.
4. Electronically filed tax returns have an error rate of only 0.5%.
(The Motley Fool)
United States tax statistics show that most tax returns are filed electronically. On result is that returns have fewer errors. According to the IRS, the error rate for paper returns is 21%. That means a paper return is 42 times more likely to contain errors. As the tax code grows increasingly complex, fewer people each year are willing to risk it.
5. 65% of American taxpayers expected a refund in 2019.
(National Retail Federation)
This information is from an income tax survey conducted by Prosper Insights & Analytics for the National Retail Federation in February 2019. About half (48%) of the respondents said that they expect the same amount as the year before, while 29% expect the refund to be higher. Some 50% said they would add the refund to their savings accounts, while 34% said they would use the money to pay off debts.
6. 59% of people believe the U.S. Government should completely change the tax system.
(Pew Research Center)
Taxpayer stats from 2011 and 2015 came up with an identical percentage of people who are dissatisfied with the tax system. Members of both major parties seem to be in favor of a complete overhaul, except that Republicans want it more (66%) compared to Democrats (48%).
General US Tax Stats
7. In 2016, the top 1% of American taxpayers paid more income taxes than the bottom 90%.
IRS statistics confirm that the rich pay most of the taxes. Overall, the top 1% of taxpayers contributed 37.3% of the government’s income tax haul, while the bottom 90% contributed only 30.5%. The bottom 50% were responsible for just 3% of the total tax paid. This is the same amount that was provided by the top 0.001% – about 1,400 citizens. These states highlight the financial power of individuals at the top and their importance for the country.
8. IRS statistics show that American families earning less than $100,000 per year have seen their risk of a tax audit risk rise by 17% since 2010.
In recent years, according to IRS tax data, there’s been a greater number of tax audits for families that are not high earners. At the same time, Americans who earn more than $100,000 saw an 8% reduction in tax audits. One explanation is that low earners are more likely to prepare their own returns and make innocent errors. Those who earn higher salaries are more likely to have their returns prepared by tax professionals who make fewer errors.
9. Higher earners are more likely to claim the self-employment tax credit.
(Small Business Trends)
The IRS database of income tax statistics shows a clear connection between higher income levels and self-employment. The self-employed are subject to taxes that employees don’t pay, but they also enjoy numerous deductions. IRS figures are based on the number of people who take the self-employment tax deduction each year on their tax returns. It is conceivable that some eligible people choose not to take the deduction and the actual number of self-employed taxpayers is even higher.