The Relationship between State and Federal Tax Audits
In: Empirical Foundations of Household Taxation
AbstractIn this paper we present an econometric analysis of state and federal tax audits. We first present results from a survey of state tax administrators. The survey results indicate that most state tax audit programs are small and rely extensively on information provided by the IRS, although some programs are large and sophisticated. We then present results from a detailed econometric analysis of Oregon state and federal tax returns and tax audits for tax year 1987. Our analysis generates three main conclusions. First, Oregon state and IRS selection criteria are similar, but not identical, suggesting that both tax agencies might benefit from greater sharing of information, especially in some audit classes. Second, Oregon state and IRS audit assessments are strongly positively correlated, as expected. Third, we estimate the shadow values associated with providing additional audit resources to the Oregon Department of Revenue and the IRS in various audit classes, and find that for the IRS the shadow values range from two to five dollars, while for Oregon the values range from one to three dollars.
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Other versions of this item:
- James Alm & Brian Erard & Jonathan S. Feinstein, 1995. "The Relationship between State and Federal Tax Audits," NBER Working Papers 5134, National Bureau of Economic Research, Inc.
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- Alm, James & Bahl, Roy & Murray, Matthew N., 1993. "Audit selection and income tax underreporting in the tax compliance game," Journal of Development Economics, Elsevier, vol. 42(1), pages 1-33, October.
- Jonathan S. Feinstein, 1991. "An Econometric Analysis of Income Tax Evasion and its Detection," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 14-35, Spring.
- James, Simon & Edwards, Alison, 2010. "An annotated bibliography of tax compliance and tax compliance costs," MPRA Paper 26106, University Library of Munich, Germany.
- Brian Erard & Jonathan S. Feinstein, 2007. "Econometric Models for Multi-Stage Audit Processes: An Application to the IRS National Research Program," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0723, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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