Signature Cheating Diagnostics

This nugget showed up on one of my favorite blogs, Tax Update, but it’s actually the result of a study done at Harvard.  The study authors’ conclusion is that tax fraud can be reduced by having taxpayers sign at the top of the form, rather in the current traditional spot at the end of 1040.  I am not making this up.  The theory behind this is that by signing at the top of the form you are indicating that you will tell the truth, going forward.  If you sign at the end in the same frame of mind -- well you can see where the thinking goes here.

I’ll admit I don’t find this logic very compelling.  Still I’m in a line of work that has a direct correlation between cheating on your taxes and unemployment, so I’m not the typical tax payer.  In the study, the researchers tested the two types of forms.  They found that “top-of-the-form signers” did better than the “bottom-of-the-form signers” in terms of honesty. The cheating rate for the top-form group was 37% and it was 79 %(!) on the regular form.  This makes me wonder where they found people willing to participate in the study.  Call me naive, but 79% of filers cheating seems high to me.  Maybe the participant population had a high overlap with the same people who filed for new home buyer tax credits from prison.

Joe Kristan, who writes the Tax Update blog, noted that the academics may have missed a key issue here in terms of cutting tax fraud.  With about 70% of people e-filing their federal taxes, there’s not a lot of signing of tax returns actually happening any more.  While one could think that makes the study irrelevant, looking at it this way actually makes the results look compelling.  The cheating rate among study participants who didn’t sign their form was 64%.  Oops.