The Cultural Grounding of Tax Issues: Insights from Tax Audits

Income tax laws are the primary motivation for many to learn and use the basics of accounting. Three stages of preparing tax returns—collecting records, organizing the information into tax and accounting categories, and abstracting the information on tax returns—successively draw individuals further into the culture of accounting. The issues raised during tax audits provide a window into the problems taxpayers have understanding and following accounting concepts and procedures. An analysis of the stages of return preparation provides insights into how issues are handled during audits and how the accounting skills of taxpayers may affect their outcomes. Data from a sample of state audits generally confirm the hypotheses and illustrate the grounding of taxpaying in accounting. Tax laws may draw individuals into this culture, but the information taxpayers collect and process to meet the needs of the government often, after the fact, has utility for the taxpayers themselves.