Improving the Effectiveness of the IRS’ Automated Substitute for Return Program

Last registered on April 20, 2021

Pre-Trial

Trial Information

General Information

Title
Improving the Effectiveness of the IRS’ Automated Substitute for Return Program
RCT ID
AEARCTR-0007402
Initial registration date
April 19, 2021

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
April 20, 2021, 6:32 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

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Primary Investigator

Affiliation
Tulane University

Other Primary Investigator(s)

PI Affiliation
Internal Revenue Service
PI Affiliation
University of Vienna
PI Affiliation
Tulane University
PI Affiliation
University of Vienna

Additional Trial Information

Status
In development
Start date
2021-06-01
End date
2023-12-31
Secondary IDs
D91
Abstract
We investigate whether behavioral insights can improve the effectiveness of communications to taxpayers from the United States Internal Revenue Service (IRS). In particular, we study the effect of changing the design and wording of IRS notices in the Automated Substitute for Return (ASFR) program on the compliance of delinquent taxpayers. Our main goal is to identify the effect of low-cost “nudges” on non-filing behavior by investigating how 1) adding an additional low-cost notice in between the automated 30- and 90-day letters and 2) changing the design and wording of IRS notices affects compliance among non-filers in the ASFR program. Specifically, we plan to address the following research questions: Is an additional low-cost letter effective in nudging non-filers toward filing? What is the return-on-investment of an additional letter in terms of nudging non-filers to file? Does the effectiveness of the letters vary by the messaging? Do the effects of these letters persist into the next tax year?
External Link(s)

Registration Citation

Citation
Alm, James et al. 2021. "Improving the Effectiveness of the IRS’ Automated Substitute for Return Program." AEA RCT Registry. April 20. https://doi.org/10.1257/rct.7402
Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)
The ASFR program is a non-filer/return delinquency compliance program that enforces filing compliance on taxpayers who owe significant amounts of income tax but have not filed their individual income tax return(s). Figure 1 of the attached IRB protocol presents the traditional ASFR timeline in black and the experimental components in red and green, described below. ASFR first attempts to get the taxpayers to file their tax returns by sending notices to delinquent taxpayers informing them that they are entering the ASFR program and asking them to file their own return by a specific date. The first notice is called the “30-day Letter.” If the taxpayer does not file their return after receiving the 30-day Letter, then ASFR sends a second notice, called the “90-day Letter.” If the taxpayer does not file their return within an IRS-designated time frame after receiving the 90-day letter, then ASFR prepares a “Substitute for Return” and issues Statutory Notices of Deficiency. In this instance ASFR determines and assesses taxpayers’ liability by computing tax, penalties, and interest based upon internal information available to the IRS.

We will select a random sample of taxpayers in the ASFR program to receive a repeat of the 30-day Letter (Control Group 1), receive one of the four new notices (treatment groups), or receive no additional letter (Control Group 2). If a taxpayer is randomly selected into a treatment group or Control Group 1 then they will receive the additional notice in between the 30- and 90-day Letters.
Intervention Start Date
2021-06-01
Intervention End Date
2022-05-31

Primary Outcomes

Primary Outcomes (end points)
1. Tax return filing rate
2. Timeliness of filing
3. Amount of tax collected
Primary Outcomes (explanation)
The timeliness of filing is the number of days or weeks between treatment and tax return receipt by the IRS. The amount of tax collected may be measured in dollars or as a percentage of the assessed tax liability.

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We will draw a random sample of approximately 48,000 taxpayers from the population of taxpayers who are in the ASFR program. In total, the IRS will distribute approximately 40,000 letters in the course of this study. The target sample size is 8,000 per letter group (the four treatment groups plus Control Group 1). In addition, the study comprises a control group of approximately 8,000 randomly selected taxpayers in the ASFR who do not receive an additional letter, but still receive the traditional 30- and 90-day Letters (Control Group 2). If a taxpayer is randomly selected into a treatment group or Control Group 1 then they will receive the additional notice in between the 30- and 90-day Letters.
Experimental Design Details
Not available
Randomization Method
Randomization done in office by a computer at the IRS.
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
48,000
Sample size: planned number of observations
48,000
Sample size (or number of clusters) by treatment arms
Approximately 48,000 taxpayers in the full sample. Target sample size is 8,000 per group, with 6 groups (the four treatment groups plus two control groups).
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
We consider a binary indicator of whether an individual filed their tax return as the outcome variable. We assume a baseline response rate of 0.08 to a single letter in the ASFR program, which is conservative given the total tax return filing rate within the ASFR program (which involves two letters). With a sample size of approximately 8,000 per group, we would be able to detect a treatment effect as small as 1.46 percentage points (18% of the baseline mean) or, equivalently, as small as 5.4% of a standard deviation of the outcome variable.
Supporting Documents and Materials

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IRB

Institutional Review Boards (IRBs)

IRB Name
Tulane University IRB
IRB Approval Date
0001-01-01
IRB Approval Number
TBD