Using reminders to increase retention at free tax sites

Background

Even though most people look forward to tax refunds, the same cannot be said about the preparing and filing of the tax returns. Tax forms are notoriously complicated and the number of people who pay professionals to help them prepare their taxes is a testament to that. The average cost of professional tax preparation is $273, which can make this service inaccessible to the many low-income individuals who need it most.

To alleviate this problem, the IRS supports the Volunteer Income Tax Assistance (VITA) program, which provides free tax preparation services for individuals with limited income.

Although this free option exists, many of those vulnerable don’t take advantage of it because of some of VITA’s drawbacks (e.g. long waiting times, brand recognition, etc.).

On top of this, many people fall victim to predatory tax preparers who offer clients “cash advances.” We worked with Robin Hood Foundation, and Ariva, a VITA site in the Bronx in New York City, to test how different SMS messages could increase usage of the VITA site. Ariva operates nine tax sites in the Bronx and one tax site in Manhattan. These sites serve around 10,000 tax filers each year.

Their main location, in the Highbridge area of the Bronx, serves over 4,000 tax filers each year. Roughly 35% of Highbridge residents live below the poverty line.

Key Insights

We conducted two full days of observation, along with ten hours of qualitative interviews with key staff members, preparers, greeters, and other volunteers. We noted that:

• Filers love Ariva. Overwhelmingly, filers have a strong sense of connection to the staff. They feel valued and respected. Yet, at the time, Ariva had limited outreach efforts, choosing to rely more on word-of-mouth than traditional marketing tactics.

• Filers often don’t bring all of the necessary documents. Filers would often forget important tax documents, extending the preparation process. In addition, many forget to bring their savings account information, reducing the likelihood of them saving part of their tax refund.

Experiment

Prior research has shown that SMS reminders are an effective way to change behavior change. For example, text messages have been shown to increase patient attendance, credit scores, and savings rates. SMS reminders can help bring issues top of mind and focus attention. Thus, we wanted to create a SMS reminder that would help to increase Ariva’s filer retention rate and increase a filer’s likelihood of saving part of their taxes.

We split Ariva’s existing user base of 4,307 former clients into four different conditions (including a control which received no SMS).

In crafting the SMS messages, we wanted to remind users of Ariva, highlight the benefits of filing with Ariva (a free service), invoke action (via direct questions), and prime clients to think about saving.

Results

At the end of the tax season, Ariva filed 3,702 tax returns. Compared to the no SMS reminders condition, both our simple reminder and our reminder + savings condition increased attendance. This simple intervention increased retention rates by roughly 12%, from 33% in the control to 37% in the simple reminder and reminder + savings conditions.

As a secondary measure for this experiment, we also wanted to see if we could savings.

We were hoping to measure savings rates by measuring the number of people who split their tax refund into a checking and a savings account by filing the Form 8888 tax form. Unfortunately, we weren’t able to track actual Form 8888 submissions to each filer.

The simple intervention of sending a one-time text, led to an additional 83 people attending Ariva. This is especially impressive given our intervention cost less than $65 total to implement. Assuming these clients would have gone to a paid preparer, our interventions saved over $21,000 in tax preparation costs just from sending out messages to clients of this one VITA site. Scaling this intervention across more VITA sites in the United States could lead to millions more in additional savings for low-to-moderate income Americans.