What is it about?
Current tax software contains a status bar that indicates whether taxpayers are due a refund or owe additional taxes at the end of the year. This status bar is updated each time tax information is input into the tax software. Conclusions show that when taxpayers owe additional taxes they are more aggressive (e.g. report less income) then when they are due a refund. However this difference in behavior is minimized when the status bar is removed from the software.
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Why is it important?
Taxpayers need to understand what impacts their reporting behavior. Especially is something is altering their decisions on a subconscious level. Regulators also need to be aware about different factors that impact taxpayer aggressiveness. Finally, software companies need to be aware of how the design of their software impact taxpayer decisions.
Perspectives
I find it interesting that there is no real reason for the status bar. Practically speaking the tax due or refund amount should not impact judgments and the software doesn't need to inform the taxpayer of this amount until the return is final and ready to submit.
William Brink
Miami University
Read the Original
This page is a summary of: The Effect of Tax Preparation Software on Tax Compliance: A Research Note, Behavioral Research in Accounting, June 2015, American Accounting Association,
DOI: 10.2308/bria-50977.
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