Once Bitten, Twice Shy? The Lasting Impact of IRS Audits on Individual Tax Reporting
Tax Administration Research Centre (TARC)
|Speaker:||Jason DeBacker, Darla Moore School of Business at the University of South Carolina|
|Date:||Tuesday 11 October 2016|
|Location:||Streatham Court B|
This paper studies the impact of tax enforcement activity on subsequent individual taxpaying behavior. We exploit four waves of randomized Internal Revenue Service (IRS) audits of individual income tax filers during the 2006-2009 period to study both the short and long run effects of audits on taxpaying behavior. Rich and confidential IRS data allow us to show the differential impact of audits across sources of income and deductions. The results highlight how the effects of audits on subsequent compliance behavior are impacted by other aspects of tax policy. The results also show how the lasting impact of audits results in a long-run revenue gain that is about two times as large at the static gain in revenue from an audit.