Transcript Session 1 - Presentation by David C. Cico

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
Research & Analysis
2
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)
Research & Analysis
3
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 NonFiler 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 return1
 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).
Research & Analysis
4
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
Research & Analysis
Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.
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 ONLINE SERVICES
Improve website interactivity specific
to international tax issues
IMPROVING THE TELEPHONE SERVICE
Improve access by providing an
international toll-free line
(1)
(2)
(3)
(4)
31%
All Respondents
(n=1,556)
16%
Research & Analysis
(5)
(6)
69%
8%
7%
14%
23%
32%
Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.
6
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.
Research & Analysis
7
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
about their most recent tax return
among those who called the IRS telephone line
about their most recent tax return
Filers
(n=108)
On the IRS website (IRS.gov)
43%
1/4
11/25
Notice/Letter from the IRS
32%
1/4
9/25
U.S. embassy or consulate
7%
1/4
2/25
IRS publication
7%
0/4
1/25
Personal accountant/bookkeeper/tax preparation
company
6%
1/4
0/25
Other
0%
0/4
0/25
Don’t remember
6%
0/4
2/25
Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro,
September 16, 2011.
Research & Analysis
Filers
(n=108)
Non-Filers Expatriates
(n=4)
(n=25)
Non-Filers Expatriates
(n=5)
(n=27)
Yes, I visited IRS.gov, but I could
not find the information I needed
43%
1/5
9/27
No, I did not visit IRS.gov before
calling the IRS telephone line
31%
1/5
4/27
Yes, I found the information on
IRS.gov, but I wanted to confirm
or clarify the information with
someone by phone
20%
3/5
10/27
Don’t remember
7%
0/5
4/27
Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro,
September 16, 2011.
8
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.
Research & Analysis
9
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
Research & Analysis
10
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.
1
Research & Analysis
U.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
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.
Research & Analysis
12
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
Page Views of "International Taxpayer"
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
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.
Research & Analysis
13
Rapid Growth of International E-Mail Inquiries
Electronic Tax Law Assistance (ETLA) Inquiries





ETLA allows taxpayers to email non-account related tax
law questions to the IRS.
Fiscal
Year
Total International
Inquiries Received
Percentage of
All Inquiries
2007
3,375
22%
The most common types of
inquiries are from non-resident
aliens and U.S. citizens living
abroad.
2008
3,483
21%
2009
7,092
37%
2010
7,920
36%
2011
8,333
37%
2012
5,454
35%
For FY 2011, ETLA received
8,333 international inquiries
(37% of all ETLA inquiries).
Source: “ETLA Access to Historical Reports,” The IRS Intranet, through 05/31/12. “Deletes”
were excluded from Total to determine the percent of International Inquiries from All Inquiries.
International inquiries have
grown 147% in just 5 years.
Electronic Tax Law Assistance (ETLA)
International Inquiry Case Types
E-mail is most expensive
service delivery channel.1
Case Type
Research & Analysis
Number
Reviewed
Percentage
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.
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.
Research & Analysis
15
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.
Research & Analysis
16
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.
Research & Analysis
17
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
Research & Analysis
18
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 Noninternational 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
Research & Analysis wage reported on Form 2555 for TY 2010 was $65,400.
19
Appendix B: Response Rates and Survey Mode Used
2011 IRS Survey of Individuals Living Abroad
Total Completed Surveys
Surveys Sent minus Undeliverable Surveys
Response Rate =
Response Rates
Sampling
Frame
Surveys
Sent
Undeliverable
Surveys
Completed
by Mail
Completed
by Web
Total
Completed
Surveys
Response
Rate**
Sampling
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
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
Expatriates
Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro, September 16, 2011.
Research & Analysis
20
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
Most Recent U.S. Federal Tax Return
Time Spent on
Most Recent
Return
(n=1,276)
2 hours or less
30%
3 to 4 hours
19%
5 to 10 hours
30%
11 to 25 hours
14%
More than 25 hours
8%
Average:
$0
$1 to $50
Money Spent
on Most Recent $51 to $200
Return
$201 to $500
(n=1,237)
More than $500
Average:
11.7 hours*
(n=1,356)
Not sure/Filed by someone else
Filed by
regular or
express mail
Delivered in person
to a U.S. embassy,
consulate, or other
IRS office
13%
34%
18%
Filed electronically
(E-file)
17%
17%
$413*
Source: 2011 Survey of Individuals Living Abroad: Top Line Report.
ICF Macro, September 16, 2011.
Research & Analysis
Filers’ Most Recent Filing Method
Source: 2011 Survey of Individuals Living Abroad: Top Line Report. ICF Macro,
September 16, 2011.