Estimating the Potential Revenue Impact of Taxing LIFO Reserves in the Current Low Commodity Price Environment

2018 ◽  
Vol 40 (2) ◽  
pp. 45-61
Author(s):  
Daniel P. Tinkelman ◽  
Christine E. L. Tan
Keyword(s):  
Commodity Prices ◽  
Commodity Price ◽  
Internal Revenue Service ◽  
Tax Revenue ◽  
Internal Revenue ◽  
Public Company ◽  
Tax Returns ◽  
Percent Rate ◽  
Inventory Method

ABSTRACT Public company LIFO reserves fell from 2012 to 2015, a time when commodity prices generally fell, and LIFO reserves and commodity prices both rose moderately in 2016. Using a combination of Internal Revenue Service (IRS) and public company data, we estimate overall U.S. LIFO reserves from 2012 to 2016, and the potential tax revenue impact of LIFO repeal. At a 35 percent (20 percent) rate, taxing the 2016 LIFO reserves would yield between $19 ($11) and $24 ($14) billion. Although less than 1 percent of 2013 corporate and partnership tax returns with inventory used LIFO, LIFO inventories comprised about 14 percent of the dollar value of U.S. company inventories. The findings on LIFO usage and the magnitude of LIFO reserves are relevant to deciding whether LIFO should be retained as an acceptable inventory method for taxes and U.S. GAAP, and also provide context for instructors teaching about inventory methods.

Tax Practitioner Credentials and the Incidence of IRS Audit Adjustments

2003 ◽  
Vol 17 (1) ◽  
pp. 1-14 ◽  
Author(s):  
Peggy A. Hite ◽  
John Hasseldine
Keyword(s):  
Random Selection ◽  
Internal Revenue Service ◽  
Internal Revenue ◽  
Tax Returns ◽  
Selection Of

This study analyzes a random selection of Internal Revenue Service (IRS) office audits from October 1997 to July 1998, the type of audit that concerns most taxpayers. Taxpayers engage paid preparers in order to avoid this type of audit and to avoid any resulting tax adjustments. The study examines whether there are more audit adjustments and penalty assessments on tax returns with paid-preparer assistance than on tax returns without paid-preparer assistance. By comparing the frequency of adjustments on IRS office audits, the study finds that there are significantly fewer tax adjustments on paid-preparer returns than on self-prepared returns. Moreover, CPA-prepared returns resulted in fewer audit adjustments than non CPA-prepared returns.

How do IRS Resources Affect the Corporate Audit Process?

2019 ◽  
Vol 95 (2) ◽  
pp. 311-338 ◽  
Author(s):  
Michelle Nessa ◽  
Casey M Schwab ◽  
Bridget Stomberg ◽  
Erin M. Towery
Keyword(s):  
Internal Revenue Service ◽  
Strategic Game ◽  
Audit Process ◽  
Publicly Traded ◽  
Budget Cuts ◽  
Corporate Tax ◽  
Negatively Associated ◽  
Internal Revenue ◽  
Audit Data ◽  
Tax Returns

ABSTRACT This study investigates how Internal Revenue Service resources affect the IRS audit process for publicly traded corporations. Using confidential IRS audit data, we examine the effect of IRS resources on the incidence and magnitude of proposed deficiencies and settlement outcomes. We find that IRS resources are positively associated with both the likelihood and magnitude of proposed deficiencies, but negatively associated with the proportion of proposed deficiencies collected. These results are consistent with the IRS focusing on fewer positions, but targeting positions supported by weaker taxpayer facts when resources are more limited. Based on our findings, we estimate the loss in tax collections from audits of LB&I corporate tax returns alone exceeds the savings from reductions in the IRS enforcement budget. This study contributes to the literature examining the strategic game between tax authorities and corporate taxpayers and has important implications for policymakers, particularly in light of recent IRS budget cuts.

The Impact of Section 7491 on Requirements for Timely Filing Tax Returns

2004 ◽  
Vol 2 (1) ◽  
pp. 13-25
Author(s):  
A. Blair Staley ◽  
Donald T. Williamson
Keyword(s):  
Burden Of Proof ◽  
Internal Revenue Service ◽  
Internal Revenue ◽  
Tax Returns ◽  
The Law ◽  
The Impact

Section 7502 of the Internal Revenue Code (“I.R.C.”) provides that a timely filed tax return or other document will be considered received by the Internal Revenue Service (IRS) when mailed. Courts differ on whether I.R.C. § 7502 precludes a taxpayer from presenting credible evidence other than a physical postmark to establish when and if a tax return was timely filed. The article traces the development of the law interpreting when a tax return is considered “filed” and what evidence must be presented to prove that filing. It finds that the enactment of I.R.C. § 7491 in 1998, which shifts the burden of proof to the IRS under certain circumstances, does not resolve the issue of what evidence establishes filing. Under I.R.C. § 7491, the taxpayer must first present “credible evidence” of timely filing before the burden of proof shifts to the IRS. The issue remains unresolved whether the I.R.C. § 7502 mailbox rule is the only means for proving the timely filing of a tax return.

scholarly journals Earnings Risk in the Household: Evidence from Millions of US Tax Returns

2020 ◽  
Vol 2 (2) ◽  
pp. 237-254
Author(s):  
Seth Pruitt ◽  
Nicholas Turner
Keyword(s):  
Administrative Data ◽  
Certainty Equivalent ◽  
Internal Revenue Service ◽  
Aggregated Data ◽  
Related Research ◽  
Internal Revenue ◽  
Risk Increase ◽  
Tax Returns ◽  
Earnings Risk

Using detailed Internal Revenue Service administrative data on millions of households, we find that households effectively insure against much of the risk facing primary earners. We show that households face less risk than males alone, and households face roughly half the countercyclical risk increase. As a result of these risk differences, household certainty equivalent earnings are 19 percent higher than for males alone, and household certainty equivalent earnings fall by about half as much during recessions. To facilitate related research, we make available the aggregated data used in our analysis. (JEL D12, D13, E32, G51)

Measuring Interstate Migration Flows: An Origin—Destination Network Based on Internal Revenue Service Records

1981 ◽  
Vol 13 (11) ◽  
pp. 1345-1360 ◽  
Author(s):  
R A Engels ◽  
Mary K Healy
Keyword(s):  
Internal Revenue Service ◽  
Data Series ◽  
Interstate Migration ◽  
Internal Revenue ◽  
Current State ◽  
The Us ◽  
Tax Returns ◽  
Federal Income Tax ◽  
Migration Flows ◽  
Migration Determinants

This paper examines gross interstate migration flows for five periods for the years between 1969 and 1978. The analysis is based upon a newly available data source—Federal income tax returns. Approximately 90% of the US population is covered by this data series. The matching of Internal Revenue Service (IRS) returns between filing dates enables the determination both of the origin and of the destination of migrants, with few of the risks of geographic miscoding present. These data illustrate that despite divergent economic fluctuations over the past nine years, the patterns of interstate migration have remained virtually unchanged. With few exceptions, the number of migrants either leaving or entering a particular state comprise identical proportions over time. Unlike migration data obtained from the Current Population Survey which enables the study of regional mobility only, the IRS data document current state-to-state flows that can be constructed on an annual basis. Comparisons are also made with the Current Work History Sample. In addition, these data offer considerable evidence that current residence has a significant impact on the selection of a destination. The resistance of migration patterns to large economic and social shifts during the period examined also implies that the explanation of individual migration determinants and the forecasting of aggregate migration flows should be treated as separate research questions. The potential of the data for the addition of further demographic detail and for use in forecasting also is considered.

The political economy of tax enforcement: a look at the Internal Revenue Service from 1978 to 2010

2015 ◽  
Vol 36 (3) ◽  
pp. 335-380 ◽  
Author(s):  
Sutirtha Bagchi
Keyword(s):  
Political Ideology ◽  
The Body ◽  
Internal Revenue Service ◽  
Criminal Investigation ◽  
The Political ◽  
Party Affiliation ◽  
Tax Enforcement ◽  
Internal Revenue ◽  
Revenue Collection ◽  
Tax Returns

AbstractThis article looks at whether political ideology matters for enforcement of the nation’s tax laws. An analysis of the Internal Revenue Service (IRS) budget and personnel suggests that the party affiliation of the President makes no difference to the overall level of IRS resources. However, there are significant increases in the number of IRS employees devoted to criminal investigation and revenue collection under Democratic administrations. Audits of tax returns filed by corporations, individuals and estates are also significantly more likely under Democratic administrations. The body of evidence points in the direction that while Congress has a greater influence in determining the overall level of resources available to the IRS, the President has a more pronounced influence on the allocation of those resources.

scholarly journals Commodity price pass-through along the pricing chain

2021 ◽  
Author(s):  
Rebeca Jiménez-Rodríguez ◽  
Amalia Morales-Zumaquero
Keyword(s):  
Emerging Economies ◽  
Raw Materials ◽  
Commodity Prices ◽  
Commodity Price ◽  
Emerging Countries ◽  
Consumer Prices ◽  
Advanced Economies ◽  
The World ◽  
Producer Prices ◽  
Pass Through

AbstractThis paper analyses the commodity price pass-through along the pricing chain for the global commodity price index and the indices of its main categories (i.e., agricultural raw materials, food and beverages, energy and metals) in the world, advanced and emerging economies. To do so, the study considers country-by-country vector autoregression models and pool the results by taking weighted means for 18 advanced economies and 19 emerging countries, as well as for the world (defined as the sum of advanced and emerging economies). The results show the following: (i) there is evidence in favour of partial pass-through from commodity prices to producer prices, although the evidence for the pass-through to consumer prices is less evident; (ii) the pass-through in the world seems to be led by both advanced and emerging countries for producer prices and only by advanced economies for consumer prices; (iii) higher prices in the four categories (agricultural raw materials only in the short-run) induce significant higher producer prices in almost all cases, with shocks in the prices of energy and metals showing the largest effects; and (iv) energy prices explain the highest variability of producer and consumer prices.

scholarly journals A Reappraisal of the Prebisch-Singer Hypothesis Using Wavelets Analysis

2021 ◽  
Vol 14 (7) ◽  
pp. 319
Author(s):  
Hany Fahmy
Keyword(s):  
International Trade ◽  
Structural Breaks ◽  
Developing Economies ◽  
Commodity Prices ◽  
Commodity Price ◽  
Data Set ◽  
Price Series ◽  
Long Run ◽  
Starting Point ◽  
The Impact

The Prebisch-Singer (PS) hypothesis, which postulates the presence of a downward secular trend in the price of primary commodities relative to manufacturers, remains at the core of a continuing debate among international trade economists. The reason is that the results of testing the PS hypothesis depend on the starting point of the technical analysis, i.e., stationarity, nonlinearity, and the existence of structural breaks. The objective of this paper is to appraise the PS hypothesis in the short- and long-run by employing a novel multiresolution wavelets decomposition to a unique data set of commodity prices. The paper also seeks to assess the impact of the terms of trade (also known as Incoterms) on the test results. The analysis reveals that the PS hypothesis is not supported in the long run for the aggregate commodity price index and for most of the individual commodity price series forming it. Furthermore, in addition to the starting point of the analysis, the results show that the PS test depends on the term of trade classification of commodity prices. These findings are of particular significance to international trade regulators and policymakers of developing economies that depend mainly on primary commodities in their exports.

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