Tax Administration:

IRS Should Reassess the Level of Resources for Testing Forms and Instructions

GAO-03-486: Published: Apr 11, 2003. Publicly Released: Apr 11, 2003.

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Taxpayers rated the Internal Revenue Service's (IRS) ability to provide clear and easy-to-use forms and instructions among the lowest of 27 indicators of service in 1993. Due to continuing concerns about unclear forms and instructions, GAO was asked to determine (1) whether and how often IRS tests the clarity of new and revised individual income tax forms and instructions; (2) the benefits, if any, of testing forms and instructions for clarity prior to their use; and (3) whether any factors limit IRS's ability to do more tests and if so, how they can be addressed.

IRS used taxpayers and its employees to test revisions to five individual income tax forms and instructions from July 1997 through June 2002. According to IRS officials, they revised about 450 tax forms and instructions in 2001, many of which were for individual income tax returns. Testing forms and instructions can help ensure their clarity and thereby benefit taxpayers and IRS by, for instance, reducing taxpayers' time to understand and complete tax forms, reducing calls to IRS for assistance, and reducing taxpayer errors. Due to similar benefits, federal agencies we contacted that routinely collect information from the public test their questionnaires. Quantifying benefits due to testing is difficult, but IRS's experience in revising and testing Earned Income Credit and Child Tax Credit forms and instructions suggests that benefits of testing in some cases can considerably exceed the cost of testing. If taxpayers who did their own tax returns needed 1 less minute to understand these two credits due to testing, their time saved, valued at the minimum wage, would be worth $1.2 million; IRS's contracting cost for the two tests was $56,000. Although IRS officials recognized that testing could be beneficial, they cited tight time frames and constrained resources as limiting their ability to do more tests. While IRS faces time constraints when making some changes to forms and instructions due to the passage of new laws, not all changes are time constrained. IRS does not have procedures specifying which versions of draft forms and instructions should be tested with taxpayers or when in its annual forms development process testing should occur. Resources currently available for testing are limited but the office responsible for testing has not developed data on missed testing opportunities and has limited data on the benefits that have been realized when testing occurred. IRS's planning and budgeting process uses such data to support resource allocation decisions.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In August 2004, IRS's staff who develop and test tax forms and instructions, in conjunction with the IRS Research Division, concluded that focus group testing of tax forms and instructions does not lend itself to establishing cost benefit analysis to assess the benefits from testing. According to IRS, focus testing does not provide quantitative data to show a link between focus testing and reduced error rates on forms and instructions tested and that factors other than testing could contribute to the results. However, IRS stated that since the GAO report, it has conducted focus group testing on major forms and used feedback to make adjustments. IRS stated that it would continue its commitment to obtain feedback from taxpayers and tax practitioners to ensure that its tax products are as simple as possible and are designed to improve customer satisfaction. IRS reaffirmed this position in April 2006.

    Recommendation: Because testing could potentially yield clearer and more understandable tax forms and instructions, thereby producing benefits both to taxpayers and IRS, the Acting Commissioner of Internal Revenue should ensure that an appropriate range of evaluations are conducted of tests that are performed to better establish the costs and benefits of performing tests and to refine IRS's approach to testing on the basis of lessons learned.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: The IRS agreed with and implemented GAO's recommendation. In response, the IRS revised its testing guidelines to include information on when draft forms and instructions should be available for testing with taxpayers in the annual forms development process.

    Recommendation: Because testing could potentially yield clearer and more understandable tax forms and instructions, thereby producing benefits both to taxpayers and IRS, the Acting Commissioner of Internal Revenue should clarify procedures by designating when in the annual forms development process that a draft version of forms and instructions should be available for testing with taxpayers.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: The IRS agreed with GAO's recommendation. IRS implemented the recommendation by developing written guidelines that incorporated the newly developed criteria for testing new, revised, or redesigned tax forms and instructions. The guidance provides information on the documentation that should be maintained that justifies the rational for testing, including an explanation of the perceived merits of testing.

    Recommendation: Because testing could potentially yield clearer and more understandable tax forms and instructions, thereby producing benefits both to taxpayers and IRS, the Acting Commissioner of Internal Revenue should develop official written guidance that incorporates those criteria and ensure that the guidance requires staff that develop new or revised forms and instructions to document which changes would merit testing and why.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: The IRS agreed with GAO's recommendation and implemented it by developing written criteria for assessing whether focus group testing should be conducted for new or redesigned tax forms and instructions.

    Recommendation: Because testing could potentially yield clearer and more understandable tax forms and instructions thereby producing benefits both to taxpayers and IRS, the Acting Commissioner of Internal Revenue should develop written criteria for determining which changes to tax forms and instructions should be tested with taxpayers before publication.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Not Implemented

    Comments: Based on an April 2007 interview with IRS staff, including its director of the Tax Forms and Publications Division, IRS did not implement our recommendation. IRS told us that it makes decisions on the adequacy of resources for testing based on the capacity of its workforce rather than by justifying and assessing whether the resource level is appropriate using information derived from documenting when testing would be beneficial and evaluations of tests.

    Recommendation: Because testing could potentially yield clearer and more understandable tax forms and instructions, thereby producing benefits both to taxpayers and IRS, the Acting Commissioner of Internal Revenue should use information gained from documenting when changes to forms or instructions likely would be beneficial and from evaluations of tests to reassess an appropriate level of resources to perform testing.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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