Research & Publications

Journal Articles

An Examination of Taxpayer Preferences for Aggressive Tax Advice

1992, National Tax Journal

Peggy A. Hite, G. McGill

Abstract

Previous theoretical work has found that taxpayers will report higher incomes when tax law is ambiguous and uncertain, yet theoretical work has also shown that there will be lower compliance on returns prepared by practitioners if preparer penalties are low. A study experimentally examined taxpayer preference for aggressive advice using questionnaire responses from a national sample of 262 US taxpayers. The study investigated whether taxpayers agreed with preparers' advice in ambiguous situations that varied by type of preparer recommendation (aggressive or conservative reporting position), probability of audit (high or low), and whether or not there would be a severe penalty. The findings suggest that taxpayers, on average, do not have a preference for aggressive tax advice. Thus, the literature positing cautious taxpayer behavior is supported, and no evidence supporting a general taxpayer demand for aggressive tax reporting is found.

Citation

Hite, Peggy A. and G. McGill (1992), "An Examination of Taxpayer Preferences for Aggressive Tax Advice," National Tax Journal, Vol. 45, December, pp. 389-403.