Searching for ghosts: who are the nonfilers and how much tax do they owe?

Abstract This paper is about ‘ghosts’ — individuals who fail to comply with their income tax filing requirements. As their name suggests, the identities and characteristics of these individuals are shrouded in mystery. In this paper we attempt to de-mystify the issues surrounding ghosts and examine their role in the compliance process. We begin by extending a standard model of tax evasion to account for the existence of ghosts. We then examine the empirical significance and policy relevance of our extension using a unique data set containing detailed tax and audit information for both filers and nonfilers of U.S. federal income tax returns.

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