Tax Preparers and the Role They Play in Taxpayer Compliance: An Empirical Investigation with Policy Implications

54 Pages Posted: 12 Jul 2011 Last revised: 25 Aug 2012

Sagit Leviner

Ono Academic College Faculties of Law & Business Administration

Kyle Richison

Office of Research Analysis and Statistics, IRS, Department of Treasury

Date Written: July 12, 2011

Abstract

In January 2010, the IRS published its Return Preparer Review Final Report, recommending extensive increases in oversight of the tax return preparer industry. These increases in oversight are suggested to be achieved through numerous measures, including preparer registration, competency testing, continuing professional education, ethical standards, and enforcement. Effective August, 2011, new paid preparer regulation requires all tax return preparers who offer their services for a fee to register and obtain a unique Preparer Tax Identification Number (PTIN) that must be used to sign all returns they prepare. Given that additional preparer regulation is expected to come into effect within the next couple of years, this paper suggests taking a step back before contemplating further steps forward. It explores existing data to shed better light on tax preparers and how they affect the tax system and its administration. Such examination, at a time of regulatory reform, may be utilized to either support and offer guidance for increased preparer oversight or may, alternatively, cast doubts over some of the regulatory advancements already implemented as well as those steps that are proposed. To this end the paper undertakes an empirical analysis of U.S. individual tax returns looking at three variables. The two independent parameters include: (1) tax return characteristics: by line item and type of return, and (2) preparation mode: whether the return is self prepared; or, if prepared by someone other than the taxpayer, by which type of a preparer. The third, dependent, variable applied is the compliance or noncompliance of the return examined. The analysis draws from 3,457 tax returns where taxpayers claimed the Earned Income Tax Credit (EITC) for Tax Year 1999. These returns have all been subject to either face-to-face or correspondence audit and provide a uniquely thorough pool of data presently unavailable for the general population.

Keywords: Tax Policy, Law and Economics, Taxpayer Compliance, Tax Intermediates, Empirical Analysis

Suggested Citation

Leviner, Sagit and Richison, Kyle, Tax Preparers and the Role They Play in Taxpayer Compliance: An Empirical Investigation with Policy Implications (July 12, 2011). Buffalo Legal Studies Research Paper No. 2011-021. Available at SSRN: https://ssrn.com/abstract=1884188 or http://dx.doi.org/10.2139/ssrn.1884188

Sagit Leviner (Contact Author)

Ono Academic College Faculties of Law & Business Administration ( email )

104 Zahal St.
Kiryat Ono, 55000
Israel

HOME PAGE: http://works.bepress.com/sagit_leviner/

Kyle Richison

Office of Research Analysis and Statistics, IRS, Department of Treasury ( email )

1111 Constitution Avenue, NW
Washington, DC 20224
United States

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