Federal Tax Returns Research Articles

The Effect of Tax Preparation Software on Tax Compliance: A Research Note

ABSTRACTTax software is commonly used in the preparation of U.S. federal and state income tax returns. A common feature of tax return preparation software is the prepayment-position status bar, which automatically calculates an updated refund/tax-due position. This paper examines whether the prepayment-position status bar, influences taxpayer decision making. This study utilizes a 2 × 2 experimental design, manipulating the taxpayers' prepayment position (refund/tax-due) and manipulating whether the prepayment-position status bar is present or absent. Using experienced taxpayers as study participants, the results of the experiment show that taxpayers are more aggressive when they are in a tax-due position compared to a refund position and that this effect is exaggerated when the tax software contains a prepayment-position status bar.

Undocumented Workers, Tax Evasion and Document Fraud: A Case Study

As immigration reform politics heats up, there are regular reminders that aliens in an amnesty plan would have to pay federal taxes previously ignored or evaded. Based on extensive research the author finds this back taxes plan likely to be more symbolic than practical, and sees little possibility for any extensive filing or delinquent federal income tax returns or payment of the taxes.This paper focuses on a prosecution which highlights the scope of the problem and the difficulties of crafting any remedy to the wide spread evasion of federal income taxes, identity theft, and document forgery.

The Effect of Mandatory Disclosure Regulation on Voluntary Disclosure: Evidence from Schedule UTP

This study exploits the implementation of IRS Schedule UTP to examine how linking tax return disclosures to financial reporting for income taxes affects firms’ reporting decisions. Using confidential tax return data and public financial statement data, I find that after imposition of Schedule UTP reporting requirements, firms report lower financial reporting reserves for uncertain income tax positions, but do not claim fewer income tax benefits on their federal tax returns. The reduction in reserves is concentrated among multinational firms and firms with larger reserves prior to Schedule UTP. These findings suggest some firms changed their financial reporting for uncertain tax positions to avoid Schedule UTP reporting requirements without changing the underlying positions. In contrast with prior studies, this evidence represents a permanent rather than a temporary tax-induced reporting change. My results imply that linking tax return disclosures to financial reporting can have unintended effects on firms’ reporting decisions.

Schedule UTP: Stock Price Reaction and Economic Consequences

ABSTRACT: In 2010, the Internal Revenue Service (IRS) announced the requirement to disclose uncertain tax positions (UTP) on a new schedule (Schedule UTP) to be filed with federal corporate income tax returns. Schedule UTP could increase a firm's tax burden by providing a roadmap for the IRS to identify firms' tax-planning strategies. We find that stock returns around the development of Schedule UTP are negative, consistent with investors' concern that Schedule UTP would impose costs on firms. However, we document a significant positive stock price reaction to the release of the final draft of Schedule UTP in which the IRS relaxed many of the controversial provisions of Schedule UTP. Additionally, we find this positive reaction is incrementally larger for more tax-aggressive firms. Finally, we find a significant decrease in reported unrecognized tax benefits (UTBs) and additions to UTBs after the adoption of Schedule UTP in 2010.

A two-state analysis of estate taxes and charitable bequests from the most generous decedents

This study uses Censored Quantile Regression (CQR) and probate records for the years 2000–2005 to analyze charitable bequests of the most generous decedents from two states, Virginia and Louisiana. We focus on the most generous decedents because they account for a large portion of total charitable bequests. The most generous decedents' charitable bequest tax price (i.e., one minus the marginal tax rate) elasticity is not significantly greater than one in both our full sample and the subsample of the decedents filing federal estate tax returns. Our finding suggests that allowing charitable bequests to be deductible is not a treasury efficient policy for the most generous decedents. We also find that the tax price and wealth effects for the most generous decedents are overestimated by the Tobit model that has been traditionally utilized by prior studies. Furthermore, filers' charitable bequests are predicted to decrease if the estate tax is repealed.

Tax Filing and Other Financial Behaviors of EITC-Eligible Households: Differences of Banked and Unbanked

Holding a bank account is crucial to the income-maximizing and asset-building of households. This study uses 2008 survey data of EITC-eligible households assisted at Volunteer Income Tax Assistance (VITA) sites to document their tax filing behavior and use of Alternate Financial Services (AFS). Specifically, the differences in tax filing and AFS use between banked and unbanked EITC-eligible households are examined. Findings reveal that unbanked status is associated with a lower likelihood of receiving a federal tax refund for tax year 2007 (TY 2007), a lower likelihood of filing a federal tax return for the previous tax year (TY 2006), a lower likelihood of receiving tax refunds via direct deposit or cashing at banks, and a higher likelihood of using check cashing stores. Findings suggest that policy changes and educational efforts should continue to focus on bringing the unbanked into the financial mainstream.

Schedule UTP: Stock Price Reaction and Economic Consequences

In 2010, the Internal Revenue Service (IRS) announced the requirement to disclose uncertain tax positions (UTP) on a new schedule (Schedule UTP) to be filed with federal corporate income tax returns. Schedule UTP could increase firm's tax burden by providing a roadmap of tax planning strategies directly to the IRS. Stock returns around the development of Schedule UTP are negative; consistent with investors' concern that Schedule UTP would impose costs on firms. However, we document a significant positive stock price reaction to the release of the final draft of Schedule UTP in which the IRS relaxed many of the controversial provisions of Schedule UTP. Additionally, we find this positive reaction is incrementally larger for more tax aggressive firms. Finally, we find a significant decrease in reported uncertain tax benefits (UTBs) and additions to UTBs after the adoption of Schedule UTP in 2010.

The Ruined Good Boy

The Ruined Good Boy

Criminal Convictions and Medical Licensure

In 1992 an Ohio physician failed to file one of his employee’s quarterly federal tax returns (a misdemeanor); in 1995 he failed to pay estimated taxes of about $160,000 (a felony). This occurred during a time when he was managing his own business affairs. In 1998 he pled guilty in federal court and paid, in addition to restitution, a $2,000 fine and served 6 months of monitored home confinement. In 2000, the Ohio board of licensure suspended his license for 90 days based on the interpretation of the law that the misdemeanor crime involved “moral turpitude.”

The Effects of Increased Book-Tax Difference Tax Return Disclosures on Firm Valuation and Behavior

ABSTRACT We use event study techniques to gauge market participants' ex ante perceptions regarding the benefits and burdens of the Schedule M-3, and structural break analysis to investigate whether managers make ex ante or ex post changes in book-tax differences as a result of this mandatory change in federal tax return disclosures. We find evidence suggesting investors believe ex ante the substantial increase in book-tax difference disclosures will increase future tax burdens and/or tax-compliance costs. Investors also appear to believe the M-3 may be more costly for firms having the types of book-tax differences that attract additional IRS scrutiny (e.g., discretionary permanent differences) and when such firms are weakly monitored. Further, we find evidence of a substantial reduction in our proxy for discretionary permanent book-tax differences prior and subsequent to the implementation of the M-3 and other regulatory events, suggesting both ex ante and ex post real effects on firm behavior. JEL Classifications: G14; H25; H26; M48. Data Availability: Data used in this study are available from public sources identified in the paper.

Learning The Ropes: An Introductory Tax Return Case

In extant literature, there are few tax return cases appearing in journals. We present a complex case using a realistic scenario that is designed to be an introductory tax return assignment used in an individual federal income taxation course. The case is designed to teach students how to manually prepare a federal income tax return using the actual forms and schedules prepared by the Internal Revenue Service (IRS). This case is timely for two reasons. 1) Often tax return assignments in textbooks involve concepts that a student has yet to learn. For example, a textbook assignment often includes itemized deductions and credits, even though these topics are typically taught towards the end of an individual tax course. 2) In addition, with the availability of information on the internet, students have greater access to solutions to textbook assignments. This case comprehensively examines concepts typically covered in the first three or four chapters of an individual tax text: various types of income, exclusions, personal and dependency exemptions, capital gains and losses, and the standard deduction.

Tax Return Preparer Penalties

The federal government does not directly regulate preparers of federal tax returns, but a tax return preparer is potentially subject to several penalties under the Internal Revenue Code if he or she fails to sign and retain records of returns prepared, is responsible for an unreasonable position on a return, or engages in willful or reckless conduct in preparing a return. The government may also petition a court for an injunction against improper acts by a preparer or an injunction forbidding a person from engaging in any tax return preparation activities. The Treasury, in response to changes in the statutes, recently restated its regulations under the preparer penalty provisions. The statutory and regulation changes have attracted much attention, particularly among tax professionals not engaged in return preparation in the conventional sense, because they impose higher standards on return preparers and make it clear that any tax advice leading to a position on a return causes an adviser to be a tax return preparer, even if the person never sees the actual return. This article, an excerpt from an upcoming revision of the treatise, Federal Taxation of Income, Estates & Gifts, discusses the preparer penalties under the current regulations.

Federal Income Tax Management

Revised! FCS-7026, an 8-page fact sheet revised by Josephine Turner, Michael S. Gutter, Nayda I. Torres, Horacio Soberon, and Zeynep Copur, has been updated for the current tax season. It describes the advantages of filing a federal tax return, who must file a return, itemizing deductions, computing income tax rates, credits, payments, preparing and filing your return, recordkeeping, and where to get help. Includes references. Published by the UF Department of Family Youth and Community Sciences, March 2009.

Did the 2008 Tax Rebates Stimulate Spending?

In an effort to bolster economic performance in light of a looming downturn in economic activity, on February 13, 2008, President George W. Bush signed the Economic Stimulus Act of 2008. More than two-thirds of the $152 billion bill consisted of economic stimulus payments to be sent beginning in May to approximately 130 million households. To qualify, recipients had to have a valid Social Security number, an income tax liability, or at least $3,000 of “qualifying income” that included earned income and some benefits from Social Security, Veterans Affairs, or Railroad Retirement, and have filed a 2007 federal tax return. For the most part those who filed as single individuals received between $300 and $600, while those who filed jointly received between $600 and $1,200. Additionally, parents with children under 17 who were eligible for a Child Tax Credit and had a Social Security number received an extra $300 per child. The tax rebate phased out at higher levels of income, as the payment was reduced by 5 percent of the amount of adjusted gross income over $75,000 for singles, or over $150,000 for married couples. The Treasury remitted payments either by direct deposit, mainly in the first half of May, or by mail, mainly from mid-May through mid-July. The effect of these stimulus payments depends on how much was spent. This paper reports new survey evidence on the propensity of consumers to spend the 2008 rebate. It also relates the survey evidence to aggregate data and to evidence about spending from the 2001 tax rebate.

A Decision Analysis Tool for Evaluating Fundraising Tiers

This paper presents a utility function model of donors who need to determine their donation to a charity organization that structures and publishes donations by tiers. By considering the prestige associated with each tier level, our analysis suggests that a tiered scheme generates an incentive for donors to raise their donation to the next tier when the originally intended donation is close to the minimum amount for the next tier level. In addition, we develop a decision analysis tool to illustrate how a charity can evaluate the effectiveness of different tier structures. Using publicly available federal tax return data and actual donations to a private high school, we present a method to estimate the model parameters. By taking other nonquantifiable factors into consideration, our tool can guide a charitable organization to determine an effective fundraising tier strategy.

Has U.S. Income Inequality Really Increased?

In recent years, both academics and public commentators have alleged that is increasing in the United States. These commentators typically cite federal income tax return data to support their claims. However, studies based on tax return data provide highly misleading comparisons of changes to the U.S. income distribution because of dramatic changes in tax rules and tax reporting in recent decades. This study attempts to correct for the distortions of using tax data to determine income distribution characteristics. It finds that, aside from stock option windfalls during the late-1990s stock-market boom, there is little evidence of a significant or sustained increase in the inequality of U.S. incomes, wages, consumption, or wealth over the past 20 years.

A Further Analysis of Determinants of Health Insurance Coverage

This study uses state-level data to identify key factors influencing geographic differentials in the percentage of the population without health insurance coverage, with particular emphasis placed on the impact of the percentage of the population that is either self-employed or independent contractors. Not surprisingly, the cross-section analysis finds that the percentage of a state's population without health insurance was a decreasing function of median family income in the state, the female labor force participation rate in the state, and the percentage of the state's population age 65 and older, while being an increasing function of the percentage of households in the state with only a female head of household present (no husband present) and the percent of the state's population classified as Hispanic. Reflecting the emphasis in this study, the empirical estimates all also reveal that the percentage of a state's population without health insurance is an increasing the percentage of the state's population that filed a federal personal income tax return that included a Schedule C, which is used in this study as a proxy for self-employment and independent contractors.

The Estate Tax and Charitable Bequests: Elasticity Estimates Using Probate Records

This paper uses data from San Francisco probate re- cords and cross-year variation in tax rates to estimate the effect of the estate tax on charitable bequests. Identification of the tax price does not require strong assumptions about the marital deduction or functional form, both of which can bias the price elasticity estimate. Estate and inheritance taxes are found to be significantly related to charitable bequests for both filers and non-filers of the federal estate tax return. These results hold whether the tax price is based on the date-of-will tax schedule, the date-of-death tax schedule, or expectations about future tax rates.

Paychex Inc

AbstractAccounting & Management Consulting Services (MIC: 12.2 SIC: 8721 NAIC:541214)Paychex is a provider of payroll and human resource and employee benefits outsourcing services for small‐ to medium‐sized businesses. Co.'s payroll processing services includes the calculation, preparation, and delivery of employee payroll checks; production of internal accounting records and management reports; and the preparation of federal, state, and local payroll tax returns. Co.'s other products and services include tax filing and payment, employee payment, time and attendance systems, regulatory compliance (new‐hire reporting and garnishment processing), retirement services administration, employee benefits administration, and workers' compensation insurance.

Paychex Inc

Mergent's Dividend AchieversVolume 2, Issue 2 p. 209-209 U.S. Company Report Paychex Inc† First published: 22 April 2005 https://doi.org/10.1002/div.2380 † Contact: : B. Thomas Golisano — Chmn., Pres., C.E.O. Address: : 911 Panorama Trail South, Rochester, NY 14625-2396 Web Site: : www.paychex.com AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Abstract Accounting & Management Consulting Services (MIC: 12.2 SIC: 721 NAIC: 41214) Paychex is a provider of payroll and human resource and employee benefits outsourcing services for small- to medium-sized businesses. Co.'s payroll processing services includes the calculation, preparation, and delivery of employee payroll checks; production of internal accounting records and management reports; and the preparation of federal, state, and local payroll tax returns. Co.'s other products and services include tax filing and payment, employee payment, time and attendance systems, regulatory compliance (new-hire reporting and garnishment processing), retirement services administration, employee benefits administration, and workers' compensation insurance. Volume2, Issue2Spring 2005Pages 209-209 RelatedInformation