TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, April 14, 2019

Taxpayer Advocate: The IRS Should Redesign Its Notices Using Psychological, Cognitive, And Behavioral Science Insights

Taxpayer Advocate (2016)Nina Olson (National Taxpayer Advocate), The IRS Should Redesign Its Notices Using Psychological, Cognitive, and Behavioral Science Insights to Protect Taxpayer Rights, Enhance Taxpayer Understanding, and Reduce Taxpayer Burden:

With the filing season in full operation, many taxpayers are receiving correspondence from the IRS that convey significant taxpayer rights and require taxpayers to take prompt action. As part of my recently released Annual Report to Congress, I included a Literature Review that investigated how notices can be improved using insights from the available psychological, cognitive, and behavioral science research. A major issue with current IRS notices is that many taxpayers have difficulty understanding them. They may be unsure about what the notice requires them to do, the steps they may need to take, or the rights they have to challenge the IRS’s determination in a notice. This, in part, is because the design of IRS notices does not take into account the findings of available literature and research regarding effective notice design. Nor are IRS notices designed from a taxpayer rights perspective, which can prevent taxpayers from learning about or exercising their rights—for example, by relegating the segment on their rights to the last page of the notice, which they are least likely to read. In fact, notices are often designed with the goal of increasing revenue rather than adequately informing taxpayers of their rights. In the three Most Serious Problems on notices included in my 2018 Annual Report to Congress (here, here, and here), I provide both critiques of current IRS notices and suggestions for improvement. One of those suggestions is for the IRS to improve taxpayer understanding and decrease taxpayer burden by redesigning its notices using psychological, cognitive, and behavioral science insights. These suggestions are summarized below. ...

The insights gained from psychological, cognitive, and behavioral science research are valuable, and should guide changes to notice design. However, it is important for any changes to newly designed notices to be thoroughly tested to ensure that they actually work as intended. Research principles can work in one context, but fail in others. Testing can also identify what changes may need to be tweaked to provide better effects, or whether additional changes may further improve notices, such as a different typography (which several studies have shown impact reader understanding and memory). It is also imperative that test studies be designed with a taxpayer rights focus. Notices that are tested for different objectives, such as increasing revenue or decreasing phone contacts, can help achieve those objectives while ignoring or overlooking other factors, such as a taxpayer’s ability to pay (see, for example, the discussion in the Economic Hardship Most Serious Problem in my 2018 Annual Report).

This year, TAS is working on examining and experimenting with core IRS notices, such as the CP11 Math Error Notice, LT11 Collection Due Process Notice, and the LT3219 Statutory Notice of Deficiency, focusing on improving taxpayer rights and understanding, and reducing taxpayer burden, using the psychological, cognitive, and behavioral science insights discussed in this blog. I am also committed to an ambitious project of designing interactive IRS roadmaps from a taxpayer’s perspective. When complete, taxpayers will be able to type in or click on the notice or letter number from the IRS correspondence they’ve received, and find their place on the roadmap. They will have plain English descriptions of the purpose of the notice and the important rights and protections granted. We’re very excited about this project; building on the Roadmaps we published in the 2018 Annual Report to Congress, we hope to have the underlying structure completed by this June, so we can begin programming. In the meantime, we will continue to advocate for better-designed, rights-based IRS notices.

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