Does Credit-Card Information Reporting Improve Small-Business Tax Compliance?

51 Pages Posted: 3 Aug 2015

See all articles by Joel B. Slemrod

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Brett Collins

Government of the United States of America - Internal Revenue Service (IRS)

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Daniel Reck

London School of Economics & Political Science (LSE)

Michael Sebastiani

Government of the United States of America - Internal Revenue Service (IRS)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2015

Abstract

We investigate the response of small businesses operating as sole proprietorships to Form 1099-K, an information report released in 2011 which provides the Internal Revenue Service with information about payment card sales. Theory and distributional analysis isolates affected taxpayers, who report receipts equal to or slightly exceeding the receipts reported on 1099-K. Information reporting made these taxpayers more likely to file a return declaring business income, and increased filers’ reported receipts by up to 24 percent. Taxpayers largely offset increased reported receipts with increased reported expenses, which do not face information reporting, diminishing the impact on reported net taxable income.

Suggested Citation

Slemrod, Joel B. and Collins, Brett and Hoopes, Jeffrey L. and Reck, Daniel and Sebastiani, Michael, Does Credit-Card Information Reporting Improve Small-Business Tax Compliance? (July 2015). NBER Working Paper No. w21412. Available at SSRN: https://ssrn.com/abstract=2638963

Joel B. Slemrod (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Room R5396
Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Brett Collins

Government of the United States of America - Internal Revenue Service (IRS) ( email )

1111 Constitution Avenue, NW
Washington, DC 20224
United States

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Daniel Reck

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Michael Sebastiani

Government of the United States of America - Internal Revenue Service (IRS) ( email )

1111 Constitution Avenue, NW
Washington, DC 20224
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
8
Abstract Views
330
PlumX Metrics