本文考慮員工薪資是由雇主申報給政府的情況。政府不能觀察到員工的真正薪資，必須透過稽查方能得知。由於稽查有成本，政府不會永遠稽查員工。因此雇主可以透過誘因契約的設計，幫助員工低報其應負的稅額。由此雇主可以誘使員工更加努力工作，進而提高產量。我們也發現，比起另一個現行的制度，即由員工自行申報其薪資，這個制度可能帶給雇主更高的利潤，給政府更高的稅收。

This paper analyzes the role played by the firm in tax compliance. The IRS cannot observe the worker's income, and so the employer has to report the worker's income to the IRS. The IRS can audit the worker when there is a possibility of tax evasion. We argue that the report made by the employer can become a tool used to control the worker's incentive to work. Compared to the second-best contract, it is possible that the employer can promise to report a lower wage income and induce the worker to put forth more effort, when the IRS audits the worker less frequently. Both the employer and the worker may be better off under such a reporting system.