Making a plan to prepare for tax day

Place: Philadelphia, PA
Partners: Center for Economic Development (CFED), Campaign for Working Families (CWF) of Philadelphia
Status: Complete

Behavioral Challenge

How can we encourage people to go through the hassles of preparing for tax day?

Background

For self-employed individuals, every piece of business expense documentation is tax-deductible, and therefore the more self-employed people are able to document, the more they are eligible to receive in tax deductions. These deductions are especially important to the low-income people CWF worked with during tax season.

CWF staff noticed that despite the orientation, many clients came to their tax appointments with little or no preparation, and CWF believed that this failure to prepare was costing their clients hundreds of dollars. 

CWF hoped the information and persuasive messages conveyed during orientation would motivate people to actually gather and organize the necessary tax information. But this was not happening. 

Redesign/Intervention

We hypothesized that the hassle of preparation might pose a significant barrier, and that people needed reminders and a sense of accountability to follow through on their intentions to prepare. 

To make the reminders as powerful as possible, we leveraged the following behavioral insights: 

  • Implementation intentions: There is evidence that implementation intentions can help people follow through and accomplish a desired goal. An implementation intention spells out the when, where and how of what one will do to reach a goal. 
  • Commitment and consistency: Telling others that we intend to behave in a certain way helps us keep our word. We like to appear consistent to ourselves and others, so we find it important that our actions and beliefs align, or at least appear to align. 

We redesigned the tax preparation orientation CWF was giving to their clients. During orientation, rather than simply discussing the importance of collecting business expenses, CWF asked each client to formulate a tax preparation plan (implementation intentions), write it down for the CWF staff to see (commitment) and then sent the preparation steps back to the clients (consistency). 

Half of CWF’s clients were randomly assigned to receive this redesigned orientation while the other went through the standard orientation. 

Results

The redesigned orientation significantly increased clients’ tax refund amount. The treatment group had refunds that were seven times larger than those in the control group: $1,837 for the treatment group compared to $241 in the control group. 

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Publications 

Applying Behavioral Research to Asset-Building Initiatives