Diana Falsetta

Integrating tax and financial accounting: three exercises for use in tax and financial accounting classes

In this chapter, we present a series of exercises designed to help students integrate their understanding of tax and financial accounting. The exercises describe a small business, Nunez Security Services, Inc., that has chosen to operate as a corporation. These exercises can be used separately or together, and require identification of items that will result in either permanent or temporary differences in financial and tax reporting. The exercises also help students develop an understanding of the implications of these differences on the calculation of tax expense for financial reporting purposes and the calculation of taxable income for tax reporting.

Discussion of “The Psychology of Billing”

Hansen, Jackson, Schaefer, and Stewart (2017) examine the effects of three contextual features on tax professionals’ billing decisions in a case involving issue-specific tax research. In this discussion, we present a tax fee model. In contrast to determining a bill, our model views tax fees in a more comprehensive perspective. We subsequently use this model to discuss the design choices and limitations of their study and to provide suggestions for future research. This article is protected by copyright. All rights reserved.

How Government Spending Impacts Tax Compliance

This study examines how taxpayer level of goal congruence (the extent to which a taxpayer’s interests align with the interests of the tax collecting agency) can improve tax compliance. While there is ample evidence on the deterrent effect of audit probability on taxpayer noncompliance, there is no evidence related to the potential role that goal congruence may have on compliance behavior. Results of our study indicate that goal congruence influences taxpayer compliance decisions, in that those with higher goal congruence (i.e., greater support for how tax dollars are spent) report higher amounts of taxable income. In addition, we find that audit probability only influences taxpayer compliance decisions when there is support for the government’s use of tax dollars. When taxpayers do not support government programs, their compliance is lower regardless of the audit probability. This highlights the importance of gaining taxpayer support for government programs, and that attempts to align the goals of taxpayers with those of the government may increase voluntary compliance among taxpayers. We also examine the role that Machiavellianism, a measure of moral obligation, plays in taxpayers’ compliance decisions. We find that for certain individuals who are motivated more by self-interest (those with high Machiavellianism), a high audit rate as well as support for a program may be necessary to improve compliance behavior. Theoretical and practical implications of these findings are discussed.