Pre-Populated Tax Returns: Taxpayer Adoption and the Effect on Taxpayer Aggressiveness

• In Event: Accounting and the New Normal: Remote Auditing, Prepopulated Tax Returns, and Algorithms

Abstract

While a pre-populated tax return system has never existed at the federal level in the U.S., it has been attempted by a few state revenue agencies. However, these systems did not survive due to lack of taxpayer participation and lobbying efforts from tax software companies. For the Internal Revenue Service to implement such a system at the federal level, it requires taxpayer participation. We conduct an experiment to examine individuals’ likelihood of using an IRS pre-populated return system and its impact on taxpayer aggressiveness. In a 2×2 experiment, we manipulate injunctive norms using public perception of the pre-populated IRS tax return (unfavorable or favorable) and manipulate filing method (IRS pre-populated return or IRS blank tax software). Results indicate that injunctive norms (i.e., public perception) influence taxpayers’ personal beliefs towards an IRS system. Personal beliefs mediate the relationship between injunctive norms and likelihood to use the IRS pre-populated tax return. Taxpayers exposed to unfavorable injunctive norms are more aggressive. In addition, taxpayers who file using an IRS pre-populated tax return are also more aggressive. More importantly, the increased aggressiveness related to the pre-populated filing method is mitigated when taxpayers are exposed to favorable injunctive norms about the IRS and the pre-populated system.

Authors

• Jason Schwebke, University of Central Florida

• William Douglas Brink, Miami University

• Victoria Jane Hansen, University of North Carolina-Wilmington

• Charles Kelliher, University of Central Florida