An examination of tax practitioner decisions: The role of preparer sanctions and framing effects associated with client condition

Tax practitioners play an important role in the voluntary compliance system. Not only do professionally prepared returns account for a significant percentage of the tax returns filed in the U.S., but empirical evidence suggests that practitioners help taxpayers lower their tax liabilities by taking advantage of ambiguous features of the tax law. This study investigates whether selected factors influence the decisions made by professional tax preparers. The subjects include 107 experienced tax practitioners who are certified public accountants. The results reflect that there is a significantly greater likelihood that the tax practitioners would sign tax returns containing a large deduction associated with an ambiguous tax issue if (1) the signing decision is made in relation to an existing client (a loss decision frame in the context of the study) or (2) tax preparer penalties are communicated with high enforcement intent.