Taxpayers' Response To Warnings Of A Possible Tax Audit: Do They Change Their Compliance Behavior?
In 2008, the New York State Department of Taxation and Finance sent letters to clients of a fraudulent tax preparer, warning them of a possible audit and asking them to participate in the Department's Voluntary Disclosure and Compliance Program if they had filed inaccurate tax returns in the past. This paper examines the impact of the letters on voluntary compliance in their future (2008 and 2009) returns. In this paper, a simple method similar to "Difference in differences", which the authors call "Difference in positions", is applied. 10,000 samples are randomly drawn from the taxpayer population and the growth rates of Federal Adjusted Gross Income (AGI) for these samples are put into relative frequency density graphs.