Research Highlight: Improving Service Delivery at the IRS
Purpose
While the mandate of the Internal Revenue Service (IRS) is to collect tax revenues through the administration and enforcement of tax laws, the IRS’s Mission Statement is, “Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.” Former Commissioner Mark Everson has said that the IRS’s “working equation” for fulfilling its mission is “Service Plus Enforcement Equals Compliance.” The provision of high quality service to taxpayers is a critical element in maximizing the number of citizens who voluntarily comply with desired behaviors—to complete tax returns correctly and pay the right amount of taxes owed on time. Failure to do so creates a societal problem in that tax shortfalls either increase the burden on law abiding citizens to make up the difference or mean important government programs that rely on tax revenues are under-funded or eliminated altogether.
The IRS provides services to taxpayers through a variety of distribution channels. The most heavily used include a nationwide network of about 401 walk-in tax assistance offices (6 to 7 million visits annually), a toll-free 800 number (56 million calls annually), and a Web site (164 million downloads in 2007). Services most sought by taxpayers include getting forms and publications, answering tax law questions, getting refund information, tax return preparation assistance, and getting information about a notice received from the IRS. Despite heavy use of all three service delivery channels, many taxpayers familiar with a particular channel are unaware of how another might better serve their needs. In addition, faced with budget constraints, the IRS must improve the efficiency of its services without reducing the overall level of service to taxpayers.
Methodology
To help achieve this goal, research was undertaken to determine the specific attributes of service most important to taxpayers in order to effectively align service tasks and taxpayer service delivery preferences. Research indicates a large and growing preference for low cost self-assisted Web applications for many transactional or informational tasks. Similarly, certain taxpayer segments prefer assisted services for reasons such as issue complexity or discomfort with Web technology. (Costs per contact in 2005 were $28.73 for tax assistance centers, $19.46 for toll-free assisted, $.71 for toll-free automated, and $.13 for the Web site.) The audience for this research was all individual taxpayers, numbering approximately 130 million. In addition, Congress has mandated that particular attention be paid to disadvantaged groups—including low income, handicapped, senior citizens, and limited English proficiency populations—to ensure that strategies developed for the tax paying population as a whole do not adversely affect any of these groups.
The survey research method employed was choice-based conjoint analysis. This method is growing rapidly in popularity for its realistic portrayal of decisions consumers make among competing alternatives in the marketplace. It presents survey respondents with a number of hypothetical “scenarios,” each showing several possible choices of service delivery channels with different levels of service on several attributes taxpayers consider important in obtaining the service they need. Respondents evaluate each alternative relative to the others and select the one they would prefer if these were the actual choices they faced in the marketplace. For example, one scenario might look like this:
IRS Tax Assistance Method |
IRS Office |
Toll-free Line Automated |
Web Site |
Toll-free Line Assisted |
Access Time |
To reach office and speak to rep 60 minutes |
To find the right menu choice 3 minutes |
To find the right section 15 minutes |
To speak to rep 5 minutes |
Servicing Time |
Once you see representative 5 minutes |
To listen to and understand answer 3 minutes |
To read and understand answer 1 minute |
To get an answer to question 10 minutes |
Hours of Availability |
Regular Business Hours, Evenings and Weekends |
24 hours, 7 days |
24 hours, 7 days |
Regular Business Hours plus Evenings |
Percent First Contact Resolution |
85% |
95% |
75% |
95% |
Each respondent is asked to evaluate 8-10 of these scenarios, each showing a different combination of attribute levels for each of the channel choices. While there are literally thousands of possible combinations of attribute levels, only a small fraction is required in order to determine exactly what is driving each respondent’s choices and what those choices would be for any possible combination. Output from the conjoint analysis consists of a numeric rating of the relative importance of each service attribute and the overall preferences for each channel for any combination of attribute levels. This can be expressed at the individual respondent level, for the respondent group as a whole, or for any particular subgroup of respondents of interest.
Which particular service attributes to include in the analysis were determined through a series of focus groups with taxpayers from a wide spectrum of geographic and socioeconomic groups. To ensure that the conjoint task was not too difficult for respondents, an initial list of 12-15 attributes was pared to the four noted in the example above (research has shown that more than 4 or 5 attributes in the conjoint task leads to unrealistic simplification on the part of respondents in order to complete the choice task). For each of these attributes, three levels were presented across the scenarios respondents evaluated. The ranges for each attribute were chosen to reflect the lowest levels taxpayers would consider acceptable, the highest levels the IRS could realistically hope to achieve, and a level somewhere inbetween.
The survey was administered online using respondents recruited from a panel maintained by a leading market research firm. Respondents completed the survey either online or, for those without computers, using an interactive television set-top box.
Results
Results of this research proved very favorable to the IRS in terms of its objective of achieving greater efficiency and effectiveness through a better understanding of taxpayer preferences and perceptions of service value. In particular, the Web site is preferred over either office visits or live-assistor telephone calls for most information seeking interactions. In addition, the telephone is preferred to office visits for most transactional interactions.
To achieve the desired service channel alignment, a range of marketing strategies are now being developed and implemented by the IRS. The main difference between the results of the conjoint analysis and the behavior currently observed in the marketplace is that the conjoint exercise reflects full awareness on the part of respondents about what each channel can provide on the attributes taxpayers consider important. In actuality, awareness of this information is severely limited. For example, many taxpayers who prefer to go to an IRS office for service have never used the Web or even the toll-free telephone line, and therefore have no idea that they could get the same service they do in person—in many instances much quicker. Thus, relative to preferences, the Web site is currently severely underutilized relative to all other channels, and the toll-free line is underutilized relative to office visits.
In addition to raising awareness of the capabilities of the Web and the toll-free telephone line (and especially the automated toll-free service), the IRS is considering the use of a range of marketing techniques for achieving their service objectives covering all of the four “P’s.” For example:
- Product: Content quality enhancements for the Web site; improved first contact resolution for the toll-free line
- Price: Expanding access to certain services (such as return preparation) to lower income taxpayers at IRS offices that would otherwise require a fee-for-service solution
- Place: Reducing wait times for reaching toll-free representatives (especially during the January through April tax season); refining the types of services available at IRS offices
- Promotion: Promoting the toll-free line and the Web site at IRS offices; promoting the Web site while on hold for a toll-free phone representative