Ambiguity and the Evaluation of Client Documentation by Tax Professionals.

Abstract Tax professionals play an important role in the application of ambiguous tax law to ambiguous tact situations. For purposes of this study, a more ambiguous situation was defined as one In which the available evidence should afford less confident judgments. A common source of ambiguity for tax professionals is weak client documentation. This paper relates prior psychological research on ambiguity to a specific tax issue, business auto documentation. In addition, the paper reports the results of two experiments in which tax professionals were asked to make judgments about business auto expenses. In each of these experiments ambiguity was operationalized as the contemporaneousness of the client's records; in each experiment ambiguity was manipulated between subjects. In the first experiment subjects exhibited no sensitivity to the ambiguity of the client's documentation when determining deductions for business auto expenses. In the second experiment the ambiguity of the client's documentation did have a statistically significant effect on the mileage amounts subjects would use when determining deductions for business auto expenses. However, the size and extent of this effect from a practical standpoint was modest. The results suggest that many tax professionals do not believe that their role includes rigorous enforcement of stringent documentation standards.