Staying compliant with federal regulations requires careful attention to deadlines throughout the year, for both organizations and individuals, as missing key dates (such as Tax Day) can result in penalties, interest charges, and potential legal complications.
Some estimates suggest that 20% of total labor hours are spent complying with rules and regulations, and to better understand where this time is going, and how much is actually spent completing compliance forms, Use Postal analyzed Office of Management and Budget (OMB) data to help reveal just how much compliance costs in both time and expenses.
Total compliance costs
The Office of Management and Budget (OMB) currently lists more than 10,000 forms and documents that individuals and organizations must complete. The OMB predicts that federal agencies will receive more than 210 billion responses to compliance forms in 2026.
This sheer volume of paperwork and form-filling is estimated to require 11.6 billion labor hours, and cost organizations and individuals over $207 billion in “out-of-pocket” expenses on software, contractors, external accountancy staff, etc.
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Analyzing the time needed to complete these federal forms and multiplying by the current ‘Avg Hourly Wage + Benefits’ listed by the Bureau of Labor Statistics (BLS), it was revealed that compliance costs over $530 billion in labor hours.
That figure of $530 billion is just the average value of people’s time, without accounting for OMB’s estimated expenses. In total, Use Postal estimates that federal compliance costs $737,794,657,816 (nearly $738 billion) in labor hours and expenses.
Of the 11.6 billion hours, 62% are related to documents and forms sent to the Department Of The Treasury, whose forms require an estimated 7.2 billion hours to complete each year – or, in financial terms, over $477 billion in labor hours and expenses.
Tax compliance costs
There are several tax and income-related forms that most Americans and businesses must complete. The first is Form 1040 (Individual Income Tax Return), for which the Department Of The Treasury estimates it receives 168,800,000 filings and responses.
According to the OMB, these nearly 169 million forms will require a combined 2.1 billion hours in 2026, suggesting it takes approximately 12 hours to complete each form and any supplementary paperwork.
This time has a cost, and if taxpayers were paid to complete their tax returns, the Individual Income Tax Return form would be worth $576 each, totaling over $97 billion. But it’s not just people’s time that is being spent; the OMB estimates that in 2026, taxpayers will spend nearly $49 billion on expenses (such as accountants and accounting software), bringing the total compliance burden cost for the Individual Income Tax Return to almost $146 billion.
For the business, the OMB estimates that the Business Income Tax Returns (Form 1120s) require 935 million labor hours, and almost $72 billion in “out-of-pocket” expenses. Taking the average employer cost for professional services roles that typically work with the company accounts and tax affairs, Use Postal estimates that businesses spend over $126 billion in staffing and expense costs when filling out their Business Income Tax Returns.
But it’s not just Business Income Tax Returns (Form 1120s) that many businesses need to work on annually. Form 941, also known as the Employer’s Quarterly Federal Tax Return, is estimated to cost over $47 billion to businesses, in staffing and expenses, and the Forms W-2/W-3 series (aka Wage and Tax Statements) cost $8.8 billion annually.
Even organizations that aren’t expected to pay any taxes – or are filing to not pay – still have to spend over $6.2 billion in staff and expense burden costs.
In response to the study’s findings, Max Clarke, founder of Use Postal, shared the following:
“These figures reflect what we see every day: compliance isn’t difficult because people are careless, it’s difficult because it’s fragmented, deadline-driven, and overwhelmingly manual.”
“Small businesses and individuals are expected to track dozens of forms and notices across multiple federal agencies, often with little clarity on what’s urgent or what happens if something is missed. When deadlines pass, the penalties and follow-on costs can add up fast.”
Max noted that much of the compliance burden is still triggered by physical correspondence.
“Critical IRS and federal agency notices are still sent by mail, and when those documents are delayed, overlooked, or misunderstood, people lose time and money trying to recover.”
“At scale, these 11.6 billion hours represent an enormous opportunity cost for the economy. That’s time taken away from building businesses, serving customers, or doing productive work. Until compliance requirements are simplified, the biggest gains will come from reducing friction by making it easier for people to see what they need to do, when they need to do it, and what actually matters.”
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Tags: 2026 taxes, income tax, Income Taxes, IRS, omb, Taxes
