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									   2012 Taxpayer Experience of Individuals Living Abroad:
  Service Awareness, Use, Preferences, and Filing Behaviors


                 New Research on Tax Administration:
                       An IRS-TPC Conference
                           June 21, 2012




Research & Analysis
   Background of International Taxpayer Research
   Wage & Investment Research and Analysis (WIRA) has conducted several
      studies on the unique needs, preferences, and behaviors of international
      taxpayers, including:
         Demographic and tax filing profiles of international taxpayers from tax years (TY)
          2006 through 2010
         Focus groups with tax practitioners who service international taxpayers
         Interviews with tax attachés working with taxpayers overseas
         2009 IRS Survey of International Taxpayers
         Collaboration with gatekeepers of U.S. Department of State (DoS) Passport Data
          and Certificate of Loss Nationality Data
         Effect of IRS Printing and Postage Budget Reduction (PPBR) on direct mailings to
          embassies and taxpayers living abroad
         2011 IRS Survey of Individuals Living Abroad




                                                                                               2
Research & Analysis
  Availability of IRS Service to International Taxpayers

    IRS Phone Representatives
          IRS Toll-Free Line (1-800-849-1040) available for Puerto Rico, Guam, Bahamas,
           and Virgin Islands
          International Telephone Line (1-267-941-1000) available for taxpayers outside of
           the U.S.
    Taxpayer Assistance Center (TAC) in Puerto Rico
          Permanent TAC in Guaynabo and Temporary TAC in Ponce
    Tax Attachés Located in London, Frankfurt, Paris, and Beijing
          In-Person; Telephone; and Mail, Fax, and E-mail Correspondence Services
          Outreach Events in Various Countries
    IRS.gov website
    Embassy websites
    Electronic Tax Law Assistance (ETLA)



                                                                                              3
Research & Analysis
                                           Survey Methodology
                      2011 IRS Survey of Individuals Living Abroad

   The sample for the 2011 IRS Survey of Individuals Living Abroad consisted of
      three distinct populations of international taxpayers:
         Filers
               Civilian, Military, and Non-Resident Alien Filers
         Non-Filers
               Non-Filers with a perceived filing obligation were identified through the IRS Non-
               Filer Database and matched against U.S. DoS Passport Data
               Non-Filers with no perceived filing obligation were identified through information
               associated with their TY 2008 return 1
         Expatriates
               Expatriates were identified through the Large Business & International (LB&I)
               Expatriate Database comprised of IRS as well as DoS data

   The 2011 IRS Survey of Individuals Living Abroad had a 32% response rate
      with 1,753 unique responses from individuals living in 81 countries.

                       1 All Non-Filers with no perceived filing obligation had no record of filing a tax return for the tax year prior to the TY
                       2008 Economic Stimulus (i.e., TY 2007) as well as no record of filing a tax return for the tax year following the TY 2008
                       Economic Stimulus (i.e., TY 2009).
                                                                                                                                                    4
Research & Analysis
                 International Taxpayers Prefer IRS.gov
                      2011 IRS Survey of Individuals Living Abroad
   66% of Filers prefer to get information on IRS.gov rather than call the IRS.
   76% of Filers prefer to consult IRS.gov before calling the IRS regarding tax law questions.
   Only 19% of Filers reported being more confident with information received from the telephone line
    compared to IRS.gov; 50% disagreed.

                 Filers’ Agreement with Statements About IRS Telephone Line and IRS.gov                                     Mean


                                                                                                                            2.53


                                                                                                                            4.14


                                                                                                                            3.89


                                                                                                                            3.46


                                                                                                                            3.80


                                                                                                                            3.57




                        Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.
Research & Analysis
International Taxpayers Prefer Improved Online Services
                       2011 IRS Survey of Individuals Living Abroad
       Nearly 70% of respondents leaned more heavily toward supporting improvements to
        the online services over improvements to the telephone service.

   “The IRS would like to focus its resources on improving the support it provides to U.S. taxpayers living abroad.
          Based on your own experiences and preferences, where should the IRS devote more resources?”
                                                Participants were instructed to select one circle
                                                       that best reflected their priorities


          IMPROVING THE TELEPHONE SERVICE                                                                     IMPROVING THE ONLINE SERVICES
             Improve access by providing an                                                                  Improve website interactivity specific
               international toll-free line                                                                       to international tax issues




                       (1)                 (2)                 (3)                  (4)                 (5)                 (6)
                                31%                                                         69%



 All Respondents
                      16%             8%       7%          14%                    23%                               32%
     (n=1,556)




                             Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.                        6
Research & Analysis
       International Taxpayers Reported Use of IRS.gov
                      2011 IRS Survey of Individuals Living Abroad

                                 Filers’ Agreement with Statements About IRS.gov
                               among those who used IRS.gov regarding their most recent tax return                          Mean


                                                                                                                            4.38




                                                                                                                            3.70




                                                                                                                            3.23



                                                                                                                            2.99




                        Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.

    The majority of Filers (84%) who visited IRS.gov agreed that it was more convenient for
     them than calling the IRS.
•    Nearly 60% agreed that it was easy to find relevant tax-related information on IRS.gov;
     however, only 41% found the international tax topics on IRS.gov easy to understand.
                                                                                                                                   7
Research & Analysis
    International Taxpayers Still Call After Visiting IRS.gov
                              2011 IRS Survey of Individuals Living Abroad

    International callers to the IRS telephone line were most likely to have found the number on
     the IRS website or in an IRS notice/letter.
    Among Filers who called the IRS, 43% did so after failing to find the information on IRS.gov
     while 31% did not visit the website before calling. Although they reported finding the
     information they needed on IRS.gov, 20% called to confirm or clarify the information.

     How Callers First Found IRS Telephone Number                                      Visited IRS.gov Before Calling IRS Telephone Line
             among those who called the IRS telephone line                                      among those who called the IRS telephone line
                 about their most recent tax return                                                 about their most recent tax return
                                     Filers      Non-Filers Expatriates                                                   Filers      Non-Filers Expatriates
                                    (n=108)        (n=4)      (n=25)                                                     (n=108)        (n=5)      (n=27)
 On the IRS website (IRS.gov)         43%            1/4          11/25          Yes, I visited IRS.gov, but I could
                                                                                                                           43%            1/5           9/27
                                                                                 not find the information I needed
 Notice/Letter from the IRS           32%            1/4           9/25
                                                                                 No, I did not visit IRS.gov before
 U.S. embassy or consulate             7%            1/4           2/25                                                    31%            1/5           4/27
                                                                                 calling the IRS telephone line
 IRS publication                       7%            0/4           1/25
                                                                                 Yes, I found the information on
 Personal accountant/book-                                                       IRS.gov, but I wanted to confirm
                                                                                                                           20%            3/5          10/27
 keeper/tax preparation                6%            1/4           0/25          or clarify the information with
 company                                                                         someone by phone
 Other                                 0%            0/4           0/25          Don’t remember                             7%            0/5           4/27
 Don’t remember                        6%            0/4           2/25            Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro,
                                                                                                                September 16, 2011.
 Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro,
                              September 16, 2011.                                                                                                              8
Research & Analysis
      Cost Not a Major Factor in Decision to Call the IRS
                      2011 IRS Survey of Individuals Living Abroad
                           Factors in Filers’ Decision Not to Call IRS Telephone Line
                                                   among those who did not call                                           Mean


                                                                                                                          3.88


                                                                                                                          2.31


                                                                                                                          2.04


                                                                                                                          2.16


                                                                                                                          1.91


                                                                                                                          2.67




                      Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.



   Only 22% of Filers cited telephone cost as a factor influencing their decision to not call the
    IRS. Among Filers who called the IRS, 33% reported not personally paying for the call.
                                                                                                                                 9
Research & Analysis
  Segmentation of Filers Based on Latent Class Analysis
                      2011 IRS Survey of Individuals Living Abroad
 Using Latent Class Analysis (LCA), five unique segments of Filers were identified
     from behavioral and attitudinal measures of telephone and electronic support:

           Do-It-Yourself (DIY) Tech – 9%
              Defining characteristics: Self-prepares taxes; uses tax software; files electronically; prefers web

           Do-It-Yourself (DIY) Paper – 30%
              Defining characteristics: Self-prepares taxes; files by paper; prefers web; considers phone a barrier;
               moderate to high awareness of federal resources

           Hire Out, Involved – 27%
              Defining characteristics: Does not prepare own taxes; moderate to high awareness of IRS
               resources, non-IRS federal resources, and non-federal resources

           Hire Out, Uninvolved – 16%
              Defining characteristics: Does not prepare own taxes; does not have reason to contact the IRS;
               generally less aware of IRS services, but is aware of personal accountant/bookkeeper

           Phone First – 19%
              Defining characteristics: Prefers improvement to phone service; web not convenient; low awareness
               of IRS website and IRS telephone line

                                                                                                                     10
Research & Analysis
 Satisfaction With Federal Resources Varies by Segment
                      2011 IRS Survey of Individuals Living Abroad
 Overall satisfaction with U.S. Federal Resources1 varied by segment, with the
     highest satisfaction among DIY Tech, DIY Paper, and Hire Out, Involved.




                          Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.




                      1U.S. Federal Resources refers to IRS resources as well as non-IRS federal resources, such as those from a U.S.
                      embassy or consulate.                                                                                             11
Research & Analysis
High Use of Non-Federal Resources to Determine Filing Req.
                      2011 IRS Survey of Individuals Living Abroad

   To determine filing requirements, Filers and Expatriates were most likely to
    consult a personal accountant/bookkeeper/tax preparation company (44% and
    54%, respectively), compared to 22% of Non-Filers. Non-Filers were most likely
    to report not consulting anyone (37%).
   Approximately 18% of Filers used an IRS resource while only 8% of Non-Filers
    used an IRS resource.




                                                                                                                            12
Research & Analysis     Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.
        Increased Use of IRS.gov During Filing Season

        For FY 2011, IRS operations data consistently reveals a greater number of page
         views of the IRS.gov International Taxpayer site when compared to the number of
         Services Provided at the International Telephone Line.
        The significant increase in number of Page Views during the filing season is not
         mirrored in the trend of Services Provided.

               80,000

               70,000

               60,000

               50,000

               40,000

               30,000

               20,000

               10,000

                  -
                        Oct-10   Nov-10    Dec-10    Jan-11     Feb-11    Mar-11     Apr-11     May-11    Jun-11     Jul-11    Aug-11   Sep-11



                        Page Views of "International Taxpayer"                  Services Provided on the International Telephone Line



                            Sources:
                            - “IRS.gov Site Usage Reports (Monthly),” Online Services SharePoint, accessed January 5, 2012.
                            - Aspect Application Activity, Joint Operations Center (JOC) ETD Quick Links, accessed January 5, 2012.

                                                                                                                                                 13
Research & Analysis
      Rapid Growth of International E-Mail Inquiries
                                                                   Electronic Tax Law Assistance (ETLA) Inquiries
    ETLA allows taxpayers to e-                                   Fiscal               Total International                   Percentage of
     mail non-account related tax                                   Year                Inquiries Received                     All Inquiries
     law questions to the IRS.                                     2007                            3,375                              22%
    The most common types of                                      2008                            3,483                              21%
     inquiries are from non-resident                               2009                            7,092                              37%
     aliens and U.S. citizens living
                                                                   2010                            7,920                              36%
     abroad.
                                                                   2011                            8,333                              37%
    For FY 2011, ETLA received
                                                                   2012                            5,454                              35%
     8,333 international inquiries
                                                              Source: “ETLA Access to Historical Reports,” The IRS Intranet, through 05/31/12. “Deletes”
     (37% of all ETLA inquiries).                             were excluded from Total to determine the percent of International Inquiries from All Inquiries.


    International inquiries have                                           Electronic Tax Law Assistance (ETLA)
                                                                              International Inquiry Case Types
     grown 147% in just 5 years.
                                                                                                                  Number
                                                                           Case Type                                                 Percentage
    E-mail is most expensive                                                                                    Reviewed
     service delivery channel.1                                Alien Issue                                              74                 26%
                                                               Filing Information                                       60                 21%
                                                               Other Tax Law Issue                                      16                  6%
                                                                   Source: “National Quality Review System Report,” IRS, 10/01/2010 – 09/30/2011.
Research & Analysis     1   W&I Finance estimates the unit cost of e-mail to be approximately $116.66 (May 10, 2012).
Consistency in Preferences and Reported/Actual Use

   Reported Preferences vs. Reported Use
          Confidence in information received from the telephone vs. IRS.gov
          Visiting IRS.gov before calling the IRS
          Convenience of IRS telephone line’s hours of operation

   Reported Use vs. Actual Use
          The comparison of Services Provided to Page Views as well as ETLA
           data support international taxpayers’ reported preferences and reported
           use of IRS.gov over the IRS telephone line.

    In summary, there is a consistent alignment between
       international taxpayers’ reported preferences, reported
       use, and actual use of IRS services.



                                                                                 15
Research & Analysis
 Significant Service Opportunities and Challenges

  Survey results strongly indicate that international taxpayer service
     needs may best be served through investments and improvements in
     the International section of IRS.gov, specifically in three key areas:
        Searchability – Improve relevance of search results relating to international
          tax topics on IRS.gov.

        Organization – Improve ease of navigation through international pages on
          IRS.gov.

        Content – Improve ease of understanding information on international tax
          topics on IRS.gov.

  While international taxpayers as a whole may best be served through
     investment and improvements to IRS.gov and/or online services, the
     challenge of providing service to facilitate compliance can not be
     overlooked.


                                                                                     16
Research & Analysis
 Significant Service Opportunities and Challenges
                                                            continued . . .


    Although the vast majority of Filers and Expatriates reported having
       Internet access at home (93% and 91%, respectively), only 58% of
       Non-Filers reported home Internet access.
    Non-Filers were also less likely to look for information on IRS.gov
       before calling the IRS (55%) or prefer getting information on IRS.gov
       (52%) compared to Filers and Expatriates.1

      Improved voluntary compliance with international tax provisions
      and a reduction in the tax gap attributable to international
      transactions will require a strategic balance of both service and
      enforcement initiatives grounded in targeted, relevant outreach
      and the effective use of technology.


                      1 Approximately 76% of both Filers and Expatriates agreed that if they had a tax question they would consult IRS.gov before
                      calling the IRS. Additionally, 66% of Filers and 62% of Expatriates indicated they preferred to get information on IRS.gov
                      rather than calling the IRS.
                                                                                                                                                    17
Research & Analysis
                                      Acknowledgements
      Directors and Management
            Mark E. Pursley, Director of WIRA
            Gwen M. Garren, Acting Director of WIRA
            Karen D. Truss, Former Chief of WIRA Research Group 4
            Javier A. Framinan, Chief of WIRA Research Group 4

      Core Project Team
            Tiffanie N. Bruch, Tax Analyst
            David C. Cico, Technical Lead Social Scientist
            Saima S. Mehmood, Social Scientist
            Julie Thompson-Evans, Contracting Officer Representative (COR)

      Contributing Researchers
            Kathleen P. Holland, Chief of WIRA Research Group 1
            Maria Celina Iglesia, Operations Research Analyst
            Robert P. Thomas, Social Scientist
            Jennifer D. Turner, Statistician

      Survey Contractor Assistance
            Pacific Consulting Group
            ICF Macro



                                                                              18
Research & Analysis
       Appendix A: Profile of International Taxpayers
        Total International Returns – For tax year (TY) 2010, 1,485,359 international returns
         were filed. In 2011, the U.S. State Department estimated that 6.32 million American
         citizens were living abroad.
        Age – About 44% of international taxpayers are between the ages of 25 and 44,
         compared to 37% of non-international taxpayers.
        Preparation Method – Of international filers, 44% self-prepared their returns, with only
         34% of these self-preparers filing electronically. In comparison, 43% of non-international
         taxpayers self-prepared their returns, with 70% of this group filing electronically.
        Filing Method – International returns were less likely to be filed electronically.
         Approximately 81% of non-international returns were filed electronically, compared to
         only 30% of total international returns.1
        Adjusted Gross Income (AGI) – Approximately 64% of total international taxpayers
         reported an AGI of $50,000 or less on Form 1040, with a median AGI of $11,770.2 Non-
         international taxpayers, in contrast, had a median AGI of $32,126.3
        Refund Owed – Nearly 60% of international returns resulted in a tax refund, compared
         to 80% of non-international returns. Also, while 24% of international taxpayers had even
         returns (neither refund owed nor balance due), only 4% of non-international taxpayers
         had even returns.
                          1 Contributing to the low electronic filing rate of international taxpayers is the inability of non-resident alien returns to be filed
                          electronically. Non-resident aliens comprise 35% of total international returns.
                          2   Excludes returns filed using Form 1040PR or Form 1040SS, as these forms do not include a line item for AGI.
                          3   International wages can be reduced by the international income exclusion on Form 2555, Foreign Earned Income. The median             19
Research & Analysis wage reported on Form 2555 for TY 2010 was $65,400.
                    Appendix B: Response Rates and Survey Mode Used
                               2011 IRS Survey of Individuals Living Abroad

                                                              Total Completed Surveys
               Response Rate =                        Surveys Sent minus Undeliverable Surveys

                                                                    Response Rates
                                                                                                               Total
                            Sampling      Surveys       Undeliverable       Completed        Completed       Completed            Response   Sampling
                             Frame         Sent           Surveys            by Mail          by Web          Surveys              Rate**      Error
Filers                      568,779         4,700             424               546              925            1,471               34%       ± 2.7%
Civilian Citizens           248,348         2,316              64               331              576             907                40%       ± 3.2%
Military Citizens           176,807         1,500             344                92              180             272                24%       ± 5.9%
Non-Resident Aliens         143,624          884               16               123              169             292                34%       ± 5.7%
Non-Filers                    N/A            300               29                51              28               79                29%        N/A
With a Filing Obligation      N/A            100               18                2               11               13                16%        N/A
With No Filing Obligation     N/A            200               11                49              17               66                35%        N/A
Expatriates                  2,010*         1,000              42                73              130             203                21%       ± 6.5%
Net Worth Above $2M           N/A            93                 0                8               11               19                21%        N/A
Net Worth Below $2M           N/A           907†               42                65              119             184                21%        N/A
Total                         N/A           6,000             495               670             1,083           1,753               32%        N/A
                              Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.

                                                                                                                                                  20
Research & Analysis
               Appendix C: Tax Preparation and Filing Among Filers
                                   2011 IRS Survey of Individuals Living Abroad

    On average, Filers reported spending nearly 12 hours and over $400 on
     activities and expenses related to their most recent U.S. federal tax return.
    Over 64% of Filers reported filing their return by regular or express mail,
     compared with 26% who filed electronically.

         Filers’ Time and Money Spent Related to                                        Filers’ Most Recent Filing Method
           Most Recent U.S. Federal Tax Return                                                            (n=1,356)
                        2 hours or less                  30%
                                                                          Not sure/Filed by someone else                                 Filed by
                        3 to 4 hours                     19%                                                                            regular or
      Time Spent on
                        5 to 10 hours                    30%                                                                           express mail
       Most Recent
         Return         11 to 25 hours                   14%              Delivered in person
        (n=1,276)                                                         to a U.S. embassy,
                        More than 25 hours                8%
                                                                          consulate, or other
                        Average:                     11.7 hours*               IRS office
                        $0                               13%
                    $1 to $50                            34%              Filed electronically
      Money Spent                                                                (E-file)
     on Most Recent $51 to $200                          18%
         Return     $201 to $500                         17%
        (n=1,237)
                    More than $500                       17%
                        Average:                        $413*
    Source: 2011 Survey of Individuals Living Abroad: Top Line Report.
                                                                         Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro,
                    ICF Macro, September 16, 2011.
                                                                                                      September 16, 2011.


Research & Analysis

								
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