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The Cultural Grounding of Tax Issues: Insights from Tax Audits

Published online by Cambridge University Press:  02 April 2024

Kent W. Smith
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Abstract

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Income tax laws are the primary motivation for many to learn and use the basics of accounting. Three stages of preparing tax returns—collecting records, organizing the information into tax and accounting categories, and abstracting the information on tax returns—successively draw individuals further into the culture of accounting. The issues raised during tax audits provide a window into the problems taxpayers have understanding and following accounting concepts and procedures. An analysis of the stages of return preparation provides insights into how issues are handled during audits and how the accounting skills of taxpayers may affect their outcomes. Data from a sample of state audits generally confirm the hypotheses and illustrate the grounding of taxpaying in accounting. Tax laws may draw individuals into this culture, but the information taxpayers collect and process to meet the needs of the government often, after the fact, has utility for the taxpayers themselves.

Type
Articles
Information
Law & Society Review , Volume 29 , Issue 3 , 1995 , pp. 437 - 474
Copyright
Copyright © 1995 by The Law and Society Association

Footnotes

*

This research was supported by the American Bar Foundation and a grant from the Fund for Research on Dispute Resolution. The opinions expressed herein do not necessarily reflect the positions of the ABF or the Fund. An earlier version was presented at the annual meetings of the Law and Society Association in Chicago, May 1993.

I thank my collaborators, Loretta Stalans, Karyl Kinsey, and Robert Mason for their many contributions to the design of the study and questionnaires. Robert Mason and Pamela Bodenroeder at Oregon State University were invaluable coordinators of the sampling and interviewing, and Pamela Bodenroeder was responsible for most of the data editing and entry. William Kenny of Portland State University coded some of the audit files, and our discussions of audit issues and how they were handled initiated some of the ideas here. I especially thank the management and staff of the Oregon Department of Revenue without whose generous cooperation and assistance this study could not have been done. I am grateful to Loretta Stalans for our many stimulating discussions of some of the issues considered here and to Karyl Kinsey, Lynn Mather, Joanne Martin, and Robert Mason for their helpful comments on earlier drafts. The editor and two anonymous reviewers contributed significantly to the clarity of the article. Any remaining obfuscation or errors are, of course, my responsibility.

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