The Demand for Tax Return Preparation Services
In this paper we focus on taxpayer choices of return preparation services. Using aggregate nested logit techniques, we find that the demand for third party preparation responds to many factors: age, education, employment status, federal auditing, and tax return characteristics. Perhaps most important among these is federal auditing. Higher federal audit rates increase the demand for tax practitioner services, but do not affect the demand for other modes of third party assistance. More generally, as the tax burden increases, or as uncertainty about true tax liability increases, the demand for all modes of third party assistance increases.
Revised version. Original dated to December 1989. Professor Graetz thanks the National Science Foundation for research support (grant no. SES-870443) as do Professors Dubin and Wilde (grant no. SES-8701027). Professor Graetz is currently serving as Deputy Assistant Secretary (Tax Policy) of the Treasury. This article was written before Professor Graetz assumed that office and does not necessarily reflect the views of the Treasury Department. Published as Dubin, Jeffrey A., Michael J. Graetz, Michael A. Udell, and Louis L. Wilde. "The demand for tax return preparation services." The Review of Economics and Statistics (1992): 75-82.
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