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Does Credit-card Information Reporting Improve Small-business Tax Compliance?

Joel Slemrod (), Brett Collins, Jeffrey Hoopes (), Daniel Reck and Michael Sebastiani

No 21412, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate the response of small businesses operating as sole proprietorships to Form 1099-K, an information report released in 2011 which provides the Internal Revenue Service with information about payment card sales. Theory and distributional analysis isolates affected taxpayers, who report receipts equal to or slightly exceeding the receipts reported on 1099-K. Information reporting made these taxpayers more likely to file a return declaring business income, and increased filers’ reported receipts by up to 24 percent. Taxpayers largely offset increased reported receipts with increased reported expenses, which do not face information reporting, diminishing the impact on reported net taxable income.

JEL-codes: H26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-ent, nep-iue, nep-pbe and nep-pub
Date: 2015-07
Note: PE
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Published as Slemrod, Joel & Collins, Brett & Hoopes, Jeffrey L. & Reck, Daniel & Sebastiani, Michael, 2017. "Does credit-card information reporting improve small-business tax compliance?," Journal of Public Economics, Elsevier, vol. 149(C), pages 1-19.

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