Thomas R. Kubick, G. Brandon Lockhart, Lilliam F. Mills & John R. Robinson haave made available their article,IRS and corporate taxpayer effects of geographic proximity, which shows that the proximity of corporate taxpayers to IRS service offices impacts their audit risk. The abstract of their article is as follows:
We investigate whether geographic proximity between corporate headquarters and IRS regional offices affects corporate tax avoidance and the likelihood and productivity of IRS examinations. Using geographic distance to represent information asymmetry, we find that corporations avoid more tax when located closer to the IRS unless they are close to an IRS industry specialist. This finding is consistent with taxpayers believing proximity provides them with an information advantage over the IRS. From the perspective of the IRS, we find that the Service is more likely to audit nearby companies and to assess more tax per hour from nearby taxpayers, except during constrained budget years. IRS audit likelihood and productivity are unaffected by the presence of nearby industry specialists, consistent with industry specialist proximity already constraining avoidance. Our tax compliance setting provides dual-party evidence on the proximity-information asymmetry hypothesis.
See full article at: IRS and corporate taxpayer effects of geographic proximity
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.