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Does Credit-card Information Reporting Improve Small-business Tax Compliance?

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Listed:
  • Joel Slemrod
  • Brett Collins
  • Jeffrey Hoopes
  • Daniel Reck
  • Michael Sebastiani

Abstract

We investigate the response of small businesses operating as sole proprietorships to Form 1099-K, an information report released in 2011 which provides the Internal Revenue Service with information about payment card sales. Theory and distributional analysis isolates affected taxpayers, who report receipts equal to or slightly exceeding the receipts reported on 1099-K. Information reporting made these taxpayers more likely to file a return declaring business income, and increased filers’ reported receipts by up to 24 percent. Taxpayers largely offset increased reported receipts with increased reported expenses, which do not face information reporting, diminishing the impact on reported net taxable income.

Suggested Citation

  • Joel Slemrod & Brett Collins & Jeffrey Hoopes & Daniel Reck & Michael Sebastiani, 2015. "Does Credit-card Information Reporting Improve Small-business Tax Compliance?," NBER Working Papers 21412, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21412
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    References listed on IDEAS

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    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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