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The Effects of Tax Software and Paid Preparers on Compliance Costs

Author

Listed:
  • Guyton, John L.
  • Korobow, Adam K.
  • Lee, Peter S.
  • Toder, Eric J.

Abstract

In recent years, the percentage of individual taxpayers using paid preparers and software has increased, while the share of taxpayers who self–prepare without software has dropped sharply. Using the Individual Taxpayer Burden Model developed by IBM Business Consulting Services for the IRS, we simulate the effects of preparation method on time and money costs of preparing tax returns. When we correct for self–selection bias, we find that each group on average selects the preparation method that costs the least for them. For example, software costs more than self–preparation for current self–preparers, but costs less than self–preparation for current software users.

Suggested Citation

  • Guyton, John L. & Korobow, Adam K. & Lee, Peter S. & Toder, Eric J., 2005. "The Effects of Tax Software and Paid Preparers on Compliance Costs," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(3), pages 439-448, September.
    • Handle: RePEc:ntj:journl:v:58:y:2005:i:3:p:439-48
    DOI: 10.17310/ntj.2005.3.09
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    Citations

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    Cited by:

    1. Bilitis Schoonjans & Philippe Van Cauwenberge & Catherine Reekmans & Gudrun Simoens, 2011. "A Survey of Tax Compliance Costs of Flemish SMEs: Magnitude and Determinants," Environment and Planning C, , vol. 29(4), pages 605-621, August.
    2. Batchelder Lily L. & Goldberg Fred T., 2008. "Reforming Tax Incentives Into Uniform Refundable Tax Credits," Basic Income Studies, De Gruyter, vol. 2(2), pages 1-11, January.
    3. Eichfelder, Sebastian & Hechtner, Frank, 2016. "Tax compliance costs: Cost burden and cost reliability," arqus Discussion Papers in Quantitative Tax Research 212, arqus - Arbeitskreis Quantitative Steuerlehre.
    4. Samara R. Gunter, 2019. "Your biggest refund, guaranteed? Internet access, tax filing method, and reported tax liability," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(3), pages 536-570, June.
    5. Sebastian Eichfelder & François Vaillancourt, 2014. "Tax Compliance Costs: A Review of Cost Burdens and Cost Structures," Hacienda Pública Española / Review of Public Economics, IEF, vol. 210(3), pages 111-148, September.
    6. Joseph Bankman & John Cogan & R. Glenn Hubbard & Daniel P. Kessler, 2012. "Reforming the Tax Preference for Employer Health Insurance," Tax Policy and the Economy, University of Chicago Press, vol. 26(1), pages 43-58.
    7. Azmi, Anna & Sapiei, Noor Sharoja & Mustapha, Mohd Zulkhairi & Abdullah, Mazni, 2016. "SMEs' tax compliance costs and IT adoption: the case of a value-added tax," International Journal of Accounting Information Systems, Elsevier, vol. 23(C), pages 1-13.
    8. Joseph Bankman & John Cogan & R. Glenn Hubbard & Daniel P. Kessler, 2012. "Reforming the Tax Preference for Employer Health Insurance," NBER Chapters, in: Tax Policy and the Economy, Volume 26, pages 43-58, National Bureau of Economic Research, Inc.
    9. Eichfelder, Sebastian & Schorn, Michael, 2009. "Tax compliance costs: a business administration perspective," Discussion Papers 2009/3, Free University Berlin, School of Business & Economics.

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