Tax audits may not have a deterrent effect, study says

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Tax audits don’t always lead to greater compliance down the road, according to a research paper that was one of several recently released in the 2016 IRS Research Bulletin.

If an audit doesn’t result in an additional tax assessment, it may actually result in a drop in compliance, according to “Do Audits Deter Future Noncompliance?,” one of several papers included in the Research Bulletin, which features papers from the latest IRS-Tax Policy Center Research Conference at the Urban Institute in Washington, D.C., last summer.

The conference highlighted research on tax compliance and current tax issues affecting tax administration, and facilitated dialogue among IRS researchers, tax experts from other countries, academic researchers, federal agencies and private sector experts.

Papers include:

  • “Do Audits Deter Future Noncompliance?” examining the number of IRS audits annually and the amount of tax recovered, the impact of enforcement activity and the distinction between compliant and non-compliant taxpayers.
  • “What Drives Income Tax Filing Noncompliance?” a look at how the decision whether to file a return is a participation decision and the apparent effects of the Economic Stimulus Act of 2008 and the EITC.
  • “Understanding the Nonfiler/Late Filer,” an examination of a recent IRS survey aimed at helping understand why individuals who have an unfiled return wait to file that return until the IRS contacts them with notices or enforcement actions.
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