FIN 48 and Tax Compliance

48 Pages Posted: 4 Dec 2007 Last revised: 6 Feb 2011

See all articles by Lillian F. Mills

Lillian F. Mills

University of Texas at Austin - McCombs School of Business

Leslie A. Robinson

Dartmouth College - Tuck School of Business; Dartmouth College - Accounting

Richard C. Sansing

Tuck School of Business at Dartmouth

Multiple version iconThere are 2 versions of this paper

Date Written: October 11, 2009

Abstract

We develop a model to examine the effects of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), on the strategic interaction between publicly-traded corporate taxpayers and the government. Several of our findings contradict conjectures voiced by members of the business community regarding the economic effects of implementing FIN 48. Specifically, taxpayers with strong facts obtain higher expected payoffs from uncertain tax benefits and some disclosed liabilities understate the expected tax liability. Consistent with the common conjectures, however, some taxpayers are more likely to be audited or are deterred from entering into transactions that generate uncertain benefits because of FIN 48.

Keywords: tax compliance, FIN 48, ASC 740-10-25, accounting for income taxes, disclosure

JEL Classification: C72, M41

Suggested Citation

Mills, Lillian F. and Robinson, Leslie and Sansing, Richard C., FIN 48 and Tax Compliance (October 11, 2009). The Accounting Review, Vol. 85, No. 5, pp. 1721-1742, 2010. Available at SSRN: https://ssrn.com/abstract=1050381

Lillian F. Mills

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

Leslie Robinson (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Dartmouth College - Accounting ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-4018 (Phone)

Richard C. Sansing

Tuck School of Business at Dartmouth ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-0392 (Phone)
603-646-1308 (Fax)

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