What question did this study set out to answer?

The study investigates how using tax preparers influences taxpayers' prepayment positions and total prepayments.

June 15, 2026

The Relation between the Use of Tax Preparers and Taxpayers' Prepayment Position.

Key Points

The study investigates how using tax preparers influences taxpayers' prepayment positions and total prepayments.
Analyzed data from 7,127 tax returns
Utilized a two-step estimation procedure to account for self-selection in tax return preparation
Assessed the differences in prepayment positions and total prepayments between paid-prepared and self-prepared returns
Paid-prepared returns show relatively larger refunds compared to self-prepared returns.
Total prepayments are smaller for paid-prepared returns, indicating lower tax liabilities.
The reduction in tax liability for paid-prepared returns exceeds the reduction in total prepayments.

Abstract

Abstract This paper presents evidence from 7,127 tax returns on the relation between tax preparer usage and taxpayers' prepayment position (refund/balance due) and total prepayments. Prepayment position is measured as total prepayments minus tax liability. Using a two-step estimation procedure that corrects for taxpayers' self-selecting return preparation mode, we find evidence of preparer effects on prepayment position and total prepayments. Specifically, paid-prepared returns have relatively larger refunds and smaller total prepayments. Together, this implies that paid-prepared returns have lower tax liabilities and that the reduction in tax liability is larger than the reduction in total prepayments,

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