Tuesday, January 29, 2019
Jason DeBacker (Middle Tennessee State), Bradley T. Heim (Indiana), Anh Tran (Indiana) & Alexander Yuskavage (Office of Tax Analysis, U.S. Treasury Department), Once Bitten, Twice Shy?: The Lasting Impact of IRS Audits on Tax Compliance, 61 J.L. & Econ. 1 (2018):
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.