Economics associate professor Jason DeBacker focuses his research on the areas of public finance and macroeconomics; before coming to the Moore School, he worked as a financial economist in the Office of Tax Analysis at the U.S. Department of the Treasury. Read DeBacker’s explanation of tax changes Americans may experience this year as the extended tax deadline submission date nears on May 17.
What are some of the biggest concerns individuals have during tax season?
The biggest concern most taxpayers have is getting their taxes done correctly, on time and without too much trouble. Economists estimate that the annual out-of-pocket and time costs of filing taxes amount to about 1 percent of the gross domestic product (GDP) — or about $220 billion — so this concern is a valid one.
What should individuals know about any changes coming during this year’s tax season?
There are a number of important changes. First, you have more time — the IRS extended the filing deadline from April 15 to May 17. Second, the Coronavirus Aid, Relief, and Economic Security Act (CARES) and the recent American Rescue Plan Act (ARPA) may have affected the taxes you file this year, changing, for example, how much you can deduct for charitable contributions or how unemployment insurance payments are taxed. The ARPA also has a number of changes for taxpayers in 2021, especially those with children. Check the IRS website for details, but hold onto those receipts for child and dependent care expenses — they’ll be more generous for most filers in 2021.
How does the federal stimulus money Americans have received factor into their taxes?
(If it doesn’t, why doesn’t it?)
Payments from the three relief bills (The ARPA Act 2021, the CARES Act 2021 and the CARES Act of 2020) were structured as refundable tax credits, so there is no need to report these as income, and they will not affect your taxes. But if you qualify for these and didn’t receive a payment, then you can claim the amount when you file your 2020 return.
What aspects of taxation do you research?
My research is in two main areas of taxation: 1) how taxpayers evade tax and respond to enforcement and 2) how taxes affect business investment, formation and the macroeconomy.
What are some of your recent topics you’ve explored?
Some of my recent work has explored how self-employed and small-business taxpayers in Kansas responded to a change in state income taxes that exempted income from non-corporate businesses. My colleagues and I found changes in how work was compensated — for example, an employee reclassifying as a contractor, partnerships changing how their partners are paid — but no real effects on investment or business formation. This had important implications nationally after the Tax Cuts and Jobs Act, which provides similar incentives. I’ve also done research on how tax compliance rates vary among high- and low-income taxpayers and what that means for how we measure income inequality.
Anything else about tax season or your research?
More than 90 percent of us pay for software or an expert to help us file our taxes, but it doesn’t need to be this way. The IRS already receives all the information it needs to compute taxes for the vast majority of us and could reach out to settle any difference between what was withheld and what you owe. But thanks to the lobbying efforts of companies like Intuit, we can’t have it this easy!