According to IRS’s estimate, it revised about 450 tax forms and  instructions in 2001 that affected individual and business tax returns. Benefits of Testing Forms and Instructions Can Far Exceed IRS’s Costs

The benefits of testing some changes to IRS’s forms and instructions can  considerably exceed IRS’s costs to do tests, especially because so many  taxpayers can be affected by improvements in clarity that may result from  testing. Finally, to illustrate the potential benefits if testing EIC and Child Tax  Credit forms and instructions made them clearer and thereby reduced  taxpayers’ time needed to understand and complete the credit forms, we  calculated the value of time saved by taxpayers (using minimum wage  levels) in understanding and completing EIC and Child Tax Credit forms  assuming the time saved was 1 minute. IRS Has Not Addressed Constraints to Increased Testing

Although IRS officials said that making greater use of testing to improve  clarity of forms and instructions could be beneficial, officials have not  addressed the two constraints—time and resources—that they state limit  their ability to do more testing of changes to forms and instructions. IRS’s current procedures for developing and revising forms and  instructions do not clearly specify which draft version of forms and  instructions should be tested with taxpayers or when in the annual forms  development cycle testing should occur. However, because  IRS does not have a clear targeted time for testing, IRS’s ability to plan and  conduct tests maybe constrained. Although they recognize that testing is beneficial, officials say time  constraints and limited resources preclude more testing. Appendix I: Objectives, Scope, and Methodology

To determine how often IRS has used taxpayers to test the clarity of new  or revised individual income tax forms and instructions, we interviewed  officials in its W&I Division’s Tax Forms and Publications Division in  Washington, D.C. We sought to obtain (a) an understanding of the process  IRS used to develop and revise individual income tax forms and  instructions and (b) gather information on the forms and instructions IRS  tested using taxpayers for the 5-year period between July 1997 and June  2002. To determine whether any factors limited IRS’s ability to use individual  taxpayers to test forms and instructions and, if so, how these factors can  be addressed, we interviewed IRS’s Tax Forms and Publications Division’s  officials and analyzed supporting data they provided us. Unlike IRS, described  below, these agencies routinely test their forms, surveys, and  questionnaires prior to distribution to the public. Appendix III: Comments from the Internal Revenue Service
Why GAO Did This Study

Taxpayers rated the Internal Revenue Service's (IRS) ability to provide clear and easy-to-use forms and instructions among the lowest of 27 indicators of service in 1993. Due to continuing concerns about unclear forms and instructions, GAO was asked to determine (1) whether and how often IRS tests the clarity of new and revised individual income tax forms and instructions; (2) the benefits, if any, of testing forms and instructions for clarity prior to their use; and (3) whether any factors limit IRS's ability to do more tests and if so, how they can be addressed.

What GAO Found

IRS used taxpayers and its employees to test revisions to five individual income tax forms and instructions from July 1997 through June 2002. According to IRS officials, they revised about 450 tax forms and instructions in 2001, many of which were for individual income tax returns. Testing forms and instructions can help ensure their clarity and thereby benefit taxpayers and IRS by, for instance, reducing taxpayers' time to understand and complete tax forms, reducing calls to IRS for assistance, and reducing taxpayer errors. Due to similar benefits, federal agencies we contacted that routinely collect information from the public test their questionnaires. Quantifying benefits due to testing is difficult, but IRS's experience in revising and testing Earned Income Credit and Child Tax Credit forms and instructions suggests that benefits of testing in some cases can considerably exceed the cost of testing. If taxpayers who did their own tax returns needed 1 less minute to understand these two credits due to testing, their time saved, valued at the minimum wage, would be worth $1.2 million; IRS's contracting cost for the two tests was $56,000. Although IRS officials recognized that testing could be beneficial, they cited tight time frames and constrained resources as limiting their ability to do more tests. While IRS faces time constraints when making some changes to forms and instructions due to the passage of new laws, not all changes are time constrained. IRS does not have procedures specifying which versions of draft forms and instructions should be tested with taxpayers or when in its annual forms development process testing should occur. Resources currently available for testing are limited but the office responsible for testing has not developed data on missed testing opportunities and has limited data on the benefits that have been realized when testing occurred. IRS's planning and budgeting process uses such data to support resource allocation decisions.