This paper assesses the influence of tax preparers on tax compliance. Using data from the Internal Revenue Service's (IRS) Taxpayer Compliance Measurement Program and an index of legal ambiguity based on Revenue Rulings, the impact of preparation mode (paid third party vs. self) on compliance at the level of the return line item is probed. The results suggest that preparers contribute to compliance by enforcing legally clear requirements but also contribute to noncompliance, as measured by the IRS, by helping taxpayers take advantage of legal ambiguity. Furthermore, an analysis of a campaign to enforce estimated tax requirements conducted by the Pennsylvania Department of Revenue suggests that tax preparers are also an important network for communicating tax agency enforcement priorities to taxpayers.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Price excludes VAT (USA)
Tax calculation will be finalised during checkout.
Allingham, M.G., and A. Sandmo, ‘ Income Tax Evasion: A Theoretical Analysis, ’ Journal of Public Economics (March, 1972), pp. 323–338.
Ayres, F.L., B.R. Jackson, and P. Hite, An Empirical Analysis of Factors Related to Tax Positions Taken by Professional Tax Preparers,’ working paper (University of Oklahoma, October, 1985).
Graetz, M.J., Reinganum, J.R., and Wilde, L., ‘ The Tax Compliance Game: Toward An Interactive Theory of Law Enforcement, ’ Journal of Law, Economics, and Organization (Spring, 1986), pp. 1–32.
Kinsey, K.A., ‘Advocacy and Perception: The Structure of Tax Practice,’ working paper (American Bar Foundation, January, 1987).
Klepper, S., and D. Nagin, ‘The Anatomy of Tax Evasion,’ Journal of Law, Economics, and Organization (forthcoming).
Long, J.E., and J.B. Caudill, ‘ The Usage and Benefits of Paid Tax Return Preparation, ’ National Tax Journal (March, 1987), pp. 37–45.
Milliron, V., ‘Features Influencing Tax Preparer Aggressiveness: A Conceptual Model’ in Contemporary Tax Research, Morianity, S., and Collins, J. (eds.) (University of Oklahoma Press, 1988).
Slemrod, J., and Sorum, N., ‘ The Compliance Cost of the U.S. Individual Income Tax System, ’ National Tax Journal (March, 1984), pp. 461–474.
Udell, M., ‘Farms and Taxes: A Study in Trends,’ 1986 Update: Trend Analyses and Related Statistics, U.S. Internal Revenue Service, Document 6011.
U.S. Department of the Treasury, Treasury Department Circular 130, 31 CFR Part 10.
An earlier version of this paper was prepared for the conference on Federal/State Research sponsored by the U.S. Internal Revenue Service.