Taxpayers 'prepayment positions and tax return preparation fees

• 成果类型: Article; Proceedings Paper
• 署名作者: Jackson, SB; Shoemaker, PA; Barrick, JA; Burton, FG
• 署名单位: University of South Carolina System; University of South Carolina Columbia; University of Nebraska System; University of Nebraska Lincoln; Brigham Young University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• 发表日期: 2005
• 页码: 409-447
• 关键词: PROSPECT-THEORY; DECISION; outcomes; price

摘要

Individuals who have their tax returns professionally prepared often overpay estimated income taxes, effectively giving the government an interest-free loan. To understand why tax professionals may place their clients in positive prepayment positions, we draw on mental accounting theory. Mental accounting theory suggests that by placing taxpayers in positive prepayment positions, tax professionals induce a favorable mental representation of tax return preparation fees, perhaps allowing them to collect larger fractions of billable time and costs incurred on taxpayers' behalves. Thus, we hypothesize that tax return preparation fees are higher for taxpayers in positive prepayment positions than for taxpayers in negative prepayment positions. Regression results using tax return data for 68,736 taxpayers provide strong support for this hypothesis. To more fully understand the general nature of the relationship between taxpayers' prepayment positions and tax return preparation fees, we adapt the prospect theory value function to the tax domain and formulate three additional hypotheses. Consistent with theory, regression results indicate that the relation between taxpayers' prepayment positions and tax return preparation fees is (1) positive, (2) stronger for taxpayers who receive refunds that are less than fees than it is for taxpayers who receive refunds that are greater than fees, and (3) stronger for taxpayers in negative prepayment positions than for taxpayers in positive prepayment positions.