“How Taxing Is Tax Filing? Leaving Money On the Table Because of Hassle Costs.”
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I use a quasi-experimental design and a novel identification strategy to estimate the burden of filing taxes. Employing US income tax returns, I observe how taxpayers choose between itemizing deductions and claiming the standard deduction. Taxpayers forgo tax savings to avoid hassle costs, resulting in an average burden of itemizing of $644 per taxpayer, and suggesting large aggregate filing costs. This burden increases with income, consistent with a higher opportunity cost of time for richer households. I provide evidence consistent with taxpayers procrastinating on filing taxes and estimate that procrastination accounts for 65% of the cost.
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