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An International Meeting of American Accounting
Association
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An Analysis of Individual Taxpayer Compliance with Federal Income Tax Laws Based on Monetary Penalties, Non-monetary Penalties, and Audit Rates |
Christopher R. Jones
Doctoral Student - University of Alabama
Edward J. Schnee
University of Alabama
Abstract: The objective of this study is to investigate the effects of audit rate and type of penalty on individual taxpayer compliance decisions. Specifically, this study examines how the likelihood of an IRS audit (i.e., audit rate) and type of penalty affect an individual’s decision to comply with Federal Income Tax laws. The audit rates manipulated are one, 15, and 30 percent. The three penalty treatments manipulated are low monetary penalty, high monetary penalty, and a non-monetary penalty. The non-monetary penalty requires individuals to provide the IRS with complete documentation for every item on their tax return (e.g., receipts, bank statements) for three years from the year of noncompliance if caught not complying with Federal Income Tax law(s).