According to the IRS, the average taxpayer spends 13 hours preparing their return. This includes record keeping, tax planning, form submission, and other related activities. And this number can vary widely depending on how complex your taxes are.
Here's a more detailed breakdown of how long average Americans spend on their tax return, followed by some pointers on how to use your time as efficiently as possible.
It takes how long to file a tax return?The average time Americans spend on their taxes varies considerably depending on which tax form they use and whether or not they have any business income.
Non-business filers, who make up 68% of all returns, spend an average of eight hours on their returns, including three hours spent on record keeping, three hours spent filling out forms, and one hour spent on tax planning. For this group, filing the return costs an average of $110, which includes all possible methods of filing (e-Filing, tax-prep software, or a tax professional), as well as other out-of-pocket costs such as postage and photocopying.
For business filers, the average time jumps significantly to 24 hours. And this group doesn't just include corporations; a return filed by anyone with any type of business income (including revenue from rental property, freelance work, etc.) is considered a "business return." The most significant difference here is record keeping, which takes 13 hours on average for business filers, though the other areas of tax preparation take significantly longer as well.
It also depends on which version of the 1040 form you choose, which makes sense, given that your choice of form generally reflects the complexity of your taxes. Total preparation times vary from five hours for a 1040-EZ to 16 hours for a standard 1040 form.
Here's a complete breakdown of the average time spent on taxes (in hours) and the average cost of filing for each of these groups of taxpayers:
How to cut down your timeThe No. 1 way to make tax-preparation more efficient is to keep organized, accurate records throughout the entire year (not just during tax season).
For example, a good way to waste a few hours of your time is by sorting through a shoebox full of receipts. Instead, come up with a filing system that allows you to sort receipts as you get them. It doesn't have to be too complex. For example, I have a drawer with a handful of envelopes that are labeled with things like "business deductions," "charity and donations," and "other deductions."
Also keep any tax documents you receive in one central location. I make a list of all of the tax forms I receive as they come in so I know exactly what I have and what I'm still waiting on.
Finally, using tax-preparation software (such as TurboTax) can save you a lot of time compared to doing your taxes completely by hand. While the cost of the software can easily exceed $100, including your state return, it could save you lots of time and help prevent errors -- no small benefit, given that you're 41 times more likely to make a mistake if you do your taxes by hand! One of our tax experts went so far as to say that doing her taxes the old-fashioned way was the biggest tax mistake she ever made.
Should you turn to the professionals?Whether or not you should hire a professional tax-preparer depends on how highly you value your time and just how complex your taxes are. If you're leaning toward professional help, ask around to see how much it might cost to get your taxes done professionally. If it seems like a reasonable expense for the time it will save you, then it's probably worth it. For example, if the difference between doing it yourself and hiring a tax professional is $200 and you estimate that it will save you 10 hours of time (and aggravation), ask yourself whether or not your time is worth more than $20 per hour.
Also keep in mind that a professional tax-preparer may be able to find tax breaks you didn't know you were eligible for, potentially saving you more than he or she charges.
The takeawayEveryone has to deal with taxes, but the time it takes out of your life is largely up to you. If you keep the necessary documents organized and buy a good software program, you could file your taxes in far less time than the average taxpayer. That said, there's a big difference between using your time wisely and rushing the process. Take the time you need to get it done right.
The article The Average American Spends This Much Time on Their Tax Return. How Do You Compare? originally appeared on Fool.com.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Intuit. The Motley Fool owns shares of Intuit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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