Assessing the Compliance Costs of IRS Post-Filing Processes

• Activity Number: 75
• Type: Contributed
• Date/Time: Sunday, August 3, 2014 : 4:00 PM to 5:50 PM
• Sponsor: Government Statistics Section
• Author(s): Ronald Hodge*+ and Naomi Dyer Yount and Jennifer O'Brien
• Companies: Internal Revenue Service Office of Research and Westat and Westat
• Keywords: Cognitive Interviews ; IRS ; Compliance Costs ; Surveys ; Administrative Data ; Modeling

Abstract

Better measurement of tax administration costs will improve our understanding of factors influencing a tax system and its outputs. The public's compliance costs are considerably larger than the budget of the tax administrator (Slemrod and Yitzhaki, 2002). There are instances when the IRS requires additional information from taxpayers after a tax return has been filed, and as a result additional costs are incurred. These post-filing compliance (PFC) costs are impractical to measure directly, they must be estimated. This paper addresses the development and administration of a survey, sample design, and modeling of the survey data to obtain estimates of PFC costs and how they vary by taxpayer characteristics.

We sampled tax returns from tax years 2008-2010 where post-filing issues were resolved during calendar year 2011. The sample was stratified based on issue complexity, preparation method, and resolution type. The survey collected PFC cost data which were then linked to IRS administrative data. Preliminary results estimate PFC cost of $400 per affected taxpayer, slightly higher than average pre-filing and filing compliance cost for all taxpayers of $373 (Marcuss et al., 2013).