Does An IRS Letter Or Notice Require Too Much Brain Heavy Lifting?

Redesigning Notices Using Psychological,
Cognitive, and Behavioral Science Insights
Could Lighten The Load

With the filing season in full operation, you may be receiving correspondence from the IRS that conveys significant taxpayer rights and requires you to take prompt action. As part of her role as National Taxpayer Advocate, Nina E. Olson recently released her Annual Report to Congress. In her report, she 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, such as:

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, the taxpayer’s rights and options are found on the last page of the notice where they are least likely to be 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 Olson’s 2018 Annual Report to Congress (here, here, and here), she provides both critiques of current IRS notices and suggestions on how to improve them. 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:

Notices Should Use Plain Language, With Simple and Personal Messages

One of the most common findings from psychological, cognitive, and behavioral science research is that using plain language principles (Center for Plain Language webpage) enhances effective communication.

Such principles include:

Highlighting or emphasizing key messages
Using personal language
Avoiding jargon

Notices should be specific and the message personalized when possible, according to Olson. They should include the facts and information that directly relate to the taxpayer. This can help prevent confusing taxpayers or burdening them with too much cognitive load, which the IRS discussed in its Behavioral Insights Toolkit. Simplification of the message similarly helps improve understanding and engagement. This can be accomplished by making the messages more concise and reducing the amount of information readers must process.

People are more likely to complete tasks when the steps are fewer, clearer, and easier to complete.

In addition, research has shown that tailoring the message to the most relevant issues for the audience or taxpayer has a greater impact on the reader’s responsiveness to the notice as opposed to a more generic message. More generic, less salient messages receive lower reader responsiveness than messages that highlight points that are particularly relevant and important for taxpayers.

The IRS Must Effectively Organize Notices To Ease Taxpayer Burden

The way a notice is organized will affect how taxpayers read and understand it. The organization of a notice can also influence taxpayers’ decisions on how to respond to a notice. Choice architecture is a design concept that guides the decision-making process. For example, a Harvard study on optimal defaults and active decisions found that the default choice was the one most often chosen by study participants. Similarly, the order of choices, or their presentation and placement on a notice, can influence which choice is made.

People Can Only Handle So Much Information At Once

Too much information can increase their cognitive burden, which will hinder understanding and decision-making, and too many choices placed together can lead to choice overload, which can similarly limit understanding or lead people to be less likely to make a choice.

The IRS Should Also Use Psychological, Cognitive, And Behavioral Science Tools To Improve Taxpayer Understanding And Effective Decision-Making

There are a variety of tools available to notice writers that can influence how a message is received and how readers will react to it. These can be used to the benefit or detriment of taxpayers, depending on how they are used. For example, reminder messages can help taxpayers remember to meet deadlines or complete necessary tasks. Messages like these are “nudges.” Warning messages are also nudges. The effect of these nudges, and how they actually steer people, will depend on another behavioral science concept: framing. Framing, according to the SAGE Handbook of Social Psychology is “the idea that identical information can be presented in different ways such that there is a different focus or a different salience of certain aspects of information.”

Essentially, the way a document is worded, or the order in which the information is presented, can influence the actions people are most likely to take in response. Framing a notice to look like a bill with a balance due and due date line on the first page, for example, could steer more people to pay what the IRS wants. Alternatively, framing a notice with a focus on taxpayer rights—by wording the notice in the context of what steps taxpayers may take, the rights they have in response to a notice, and the deadlines to retain those rights—can steer more taxpayers to learn, understand, and exercise their rights, instead of paying blindly.

It Is Further Necessary For The IRS To Experiment And Test Changes To Notices To Determine What Are The Most Effective Notice Designs

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 different typography. 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.

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This post is taken from the NTA Blog by Nina E. Olson dated April 3, 2019. The views expressed in this blog are solely those of the National Taxpayer Advocate (NTA). The NTA is appointed by the Secretary of the Treasury and reports to the Commissioner of Internal Revenue. However, the NTA presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.