Increasing voluntary tax compliance through return preparer early intervention

Last registered on December 20, 2021
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Pre-Trial

Trial Information

General Information

Title
Increasing voluntary tax compliance through return preparer early intervention
RCT ID
AEARCTR-0007926
Initial registration date
July 07, 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
July 08, 2021, 3:00 PM EDT

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

Last updated
December 20, 2021, 8:36 AM EST

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country
United States of America
Region

Primary Investigator

Name
David Schwegman
Affiliation
OES - GSA
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Other Primary Investigator(s)

PI Name
Mary Clair Turner
PI Affiliation
U.S. General Services Administration, Office of Evaluation Sciences
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PI Name
Julia Brown
PI Affiliation
U.S. General Services Administration, Office of Evaluation Sciences
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PI Name
Mattie Toma
PI Affiliation
U.S. General Services Administration, Office of Evaluation Sciences
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PI Name
Sebastian Jilke
PI Affiliation
U.S. General Services Administration, Office of Evaluation Sciences
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PI Name
Anne Herlache
PI Affiliation
Research Applied Analytics and Statistics Division, Internal Revenue Service
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Additional Trial Information

Status
On going
Start date
2020-11-18
End date
2023-01-31
Keywords
Finance & Microfinance, Welfare
Additional Keywords
tax compliance, behavioral, communication
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
The main project objective is to increase voluntary tax compliance on tax returns completed by return preparers through education and outreach. Specifically, the project aims to inform the content included in the Letter 5025 that the Internal Revenue Service (IRS) sends to return preparers during the pre-filing season as part of their tiered strategy to improve the accuracy of claiming certain benefits. The Office of Evaluation Sciences (OES) at the U.S. General Services Administration and the Research Applied Analytics and Statistics (RAAS) and Wage and Investment (W&I) divisions of the IRS collaborated to design and evaluate an updated “Behavioral Insights” (BI) Letter 5025. The primary analysis will compare outcomes for return preparers randomly assigned to one of three pre-filing season groups: (a) sent the updated BI Letter 5025, (b) sent the Treatment-as-Usual (TAU) Letter 5025, (c) sent no letter (or other pre-filing season treatment).
External Link(s)
Analysis Plan and OES Project Page

Registration Citation

Citation
Brown, Julia et al. 2021. "Increasing voluntary tax compliance through return preparer early intervention." AEA RCT Registry. December 20. https://doi.org/10.1257/rct.7926-1.2000000000000002
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2020-11-18
Intervention End Date
2021-05-17

Primary Outcomes

Primary Outcomes (end points)
There are four primary outcomes of interest:
(1) Proportion of tax returns that may contain errors when claiming certain benefits:
Number of returns prepared that may contain one or more error when claiming certain benefits / Total number of returns prepared,

where, for the purpose of this study, certain benefits include: the earned income tax credit (EITC), child tax credit/additional child tax credit/credit for other dependents (CTC/ACTC/ODC), American opportunity tax credit (AOTC) and head of household (HOH) filing status.

(2) Capped proportion of returns that may contain errors when claiming certain benefits: The maximum value across the filing season will be capped at the lowest threshold at which education and outreach during the filing season may have occurred among return preparers in our study sample. This measure will be captured only after the return preparer has filed a predetermined number of returns overall, or a predetermined number of returns with errors. Results will be pooled across return preparer types.

For the purposes of this study, this value is then winsorized at the lowest proportion of errors for which a return preparer in our sample was exposed to a filing season treatment. Finally, this outcome will be transformed such that it reflects the proportion of errors as a percent of this cap; for instance, if the return preparer hit the cap this outcome would take on a value of 1, and if the return preparer’s proportion of errors was 50% of the cap, this outcome would take on a value of 0.5.

(3) Sum of erroneous dollars: this is a numeric variable that equals the numeric value for the sum of erroneous dollars that may have been claimed for certain benefits aggregated across the return preparer’s returns filed for their clients.

(4) Refund amount: A numeric refund amount aggregated across the return preparer’s returns filed for their clients.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
We also consider four secondary outcomes of interest:

(1) Number of returns prepared: Count of total number of returns a return preparer filed for their clients.

(2) Number of returns prepared claiming one or more benefits: Count of the total number of returns a return preparer filed claiming at least one benefit.

(3) Proportion of returns that claim certain benefits, which may contain errors in claiming these benefits:

Number of returns prepared that may contain one or more error when claiming certain benefits / Total number of returns prepared that claim one or more of these benefits

(4) The number of return preparers still working in filing season 2021: The variable is equal to one if the return preparer files a predetermined number of returns and zero otherwise.


Finally, we consider the following exploratory outcomes:

(1) Whether the return preparer would have been exposed to additional education and outreach during the filing season: A binary variable equal to one if the capped proportion of return measure equals 1 and zero otherwise.

(2) Refund amount for clients from the 2020 filing season: Defined above.

(3) Number of returns prepared for clients from the 2020 filing season: Defined above.

(4) Number of returns prepared claiming one or more benefits for clients from the 2020 filing season: Defined above.

(5) Change in claiming errors between returns filed in 2020 and returns filed in 2021: Number of returns that may contain at least one error in claiming certain benefits filed during filing season 2020 minus the number of returns that may contain at least one error in claiming certain benefits filed during filing season 2021.

(6) Incidence of different types of errors: A count of the number of returns that may contain errors in claiming: (i) all benefits relevant to the letter, (ii) EITC, (iii) ACTC/CTC/ODC, and (iv) AOTC.

(7) Use of refund-anticipation products: A binary variable equal to one if the return preparer’s clients used refund-anticipation products (if these data are available).

(8) Self-File: Proportion of clients from the 2020 filing season who filed their tax returns themselves during the 2021 filing season.

(9) Did Not File: Proportion of clients who did not file their tax returns during the 2021 filing season but did file their tax returns during the 2020 filing season.

(10) Change in erroneous dollars between returns filed in 2020 and returns filed in 2021: Sum of the value of erroneous dollars in filing season 2020 minus the value in filing season 2021. (This outcome will be calculated in a manner consistent with prior IRS reporting for measuring protected revenue.)

(11) Change in refund amount between returns filed in 2020 and returns filed in 2021: The total refund amount in filing season 2020 minus the value in filing season 2021. (This outcome will be calculated in a manner consistent with prior IRS reporting for measuring protected revenue.)

Importantly, all primary and secondary outcomes will be captured among returns for clients that a return preparer filed during the 2021 filing season. Exploratory analyses will additionally look at some outcomes during the 2021 filing season for the clients who used the return preparers in our sample during the 2020 filing season.
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Random assignment occurred within blocks of return preparers who were similar at baseline. Return preparers were block-randomized to one of three pre-filing season treatment conditions: (a) sent the updated “Behavioral Insights” Letter 5025 (40%), (b) sent the “Treatment as Usual” Letter 5025 (40%), (c) sent no letter (or other pre-filing season treatment) (20%). The return preparers in the sample include those who may not have met due diligence requirements on returns and claims for refund filed for their clients last year.*

*Citation: “Earned Income Tax Credit and Other Refundable Credits: Reaching Out to Preparers,” Internal Revenue Service, accessed August 28 2020, https://www.eitc.irs.gov/tax-preparer-toolkit/preparer-
compliance-focused-and-tiered/reaching-out-to-preparers/reaching-out

Experimental Design Details
Randomization Method
Randomization done in office by a computer
Randomization Unit
Return preparers
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
N/A
Sample size: planned number of observations
Approximately 7,170
Sample size (or number of clusters) by treatment arms
20% return preparers in no contact control
40% return preparers in TAU 5025 Letter
40% return preparers in BI 5025 Letter
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Institutional Review Board, Office of Research Integrity, American University
IRB Approval Date
2021-03-03
IRB Approval Number
IRB-2021-232
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials