Quick Study: To Close The ‘Tax Gap’, Take A Look At Partnerships

What if the IRS could recover $20 for every $1 it spends on a tax audit?

In a rare collaboration with the IRS and Stanford’s RegLab, Rebecca Lester, Associate Professor of Accounting, and her team studied over 12 million tax returns. They discovered that the most tangled partnerships — with multiple tiers of ownership and thousands of entities — are often skipped by auditors due to their complexity.

But when the IRS does push forward and complete an audit? The return on investment is enormous.

“Complex partnerships yield eight times the return compared to auditing big C-corporations,” says Lester. “It pays for itself and then some. #gsbquickstudy