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Individual Income Tax Compliance and Information Reporting: What Do the U.S. Data Show?

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  • Mark D. Phillips

Abstract

This paper examines 2001 National Research Program data to assess the role of information reporting in explaining individual income tax compliance in the United States. Taxpayers are largely compliant in self-reporting third-party “matched” income; furthermore, many taxpayers underreport 100 percent of “unmatched” income. However a majority of noncompliant taxpayers, particularly those with large amounts of unmatched income, underreport only a portion of it. Taxpayers exhibit signifcant heterogeneity with regard to the critical amount of unmatched income at which they switch from full to partial noncompliance. The increase in underreported income that arises from a marginal increase in unmatched income also varies across taxpayers.

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  • Mark D. Phillips, 2014. "Individual Income Tax Compliance and Information Reporting: What Do the U.S. Data Show?," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(3), pages 531-568, September.
    • Handle: RePEc:ntj:journl:v:67:y:2014:i:3:p:531-568
    DOI: 10.17310/ntj.2014.3.02
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    2. Siglé, Maarten & Goslinga, Sjoerd & Speklé, Roland & van der Hel, Lisette & Veldhuizen, Robbert, 2018. "Corporate tax compliance: Is a change towards trust-based tax strategies justified?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 32(C), pages 3-16.
    3. Adhikari, Bibek & Alm, James & Collins, Brett & Sebastiani, Michael & Wilking, Eleanor, 2022. "Using a natural experiment in the taxicab industry to analyze the effects of third-party income reporting," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 312-333.
    4. Jagrič Timotej & Lešnik Tomaž & Grbenic Stefan O. & Jagrič Vita, 2019. "The Fulfilment of Tax Obligation in Case of Slovenian Tax Residents Working in Other Countries," Naše gospodarstvo/Our economy, Sciendo, vol. 65(4), pages 27-34, December.
    5. Adhikari, Bibek & Alm, James & Harris, Timothy F., 2021. "Small business tax compliance under third-party reporting," Journal of Public Economics, Elsevier, vol. 203(C).
    6. Sarah Clifford & Panos Mavrokonstantis, 2019. "Tax Enforcement Using A Hybrid Between Self- And Third-Party Reporting," Economics Series Working Papers 876, University of Oxford, Department of Economics.
    7. Michele Lalla & Patrizio Frederic & Daniela Mantovani, 2022. "The inextricable association of measurement errors and tax evasion as examined through a microanalysis of survey data matched with fiscal data: a case study," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 31(5), pages 1375-1401, December.
    8. Clifford, Sarah & Mavrokonstantis, Panos, 2021. "Tax enforcement using a hybrid between self- and third-party reporting," Journal of Public Economics, Elsevier, vol. 203(C).
    9. Cebula, Richard J., 2020. "The Relative Tax Gap Hypothesis: An Exploratory Analysis and Application to U.S. Financial Markets," American Business Review, Pompea College of Business, University of New Haven, vol. 23(1), pages 35-52, May.

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