The Effects of Prefilled Tax Returns on Taxpayer Compliance

What is it about?

U.S. senators recently proposed the Tax Filing Simplification Act of 2017, which would allow the government to complete tax returns on the behalf of taxpayers. In this study, we conduct two experiments to examine how the implementation of prefilled returns would affect taxpayer compliance. To investigate the impact of prefilled returns on compliance decisions, we manipulate reporting method (self-completed or prefilled with no, low, mid, or high estimate of undocumented income) and prepayment position (refund or tax due). We find that prefilled returns-in their proposed form-lower taxpayer compliance relative to self-completed returns. However, we also test an alternative implementation of prefilled returns that contain government estimates of undocumented income and show that compliance increases relative to self-completed returns. Finally, we show that prior findings on the behavior of taxpayers in gain (refund) and loss (tax due) positions do not hold in the context of prefilled returns.

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