2007 Minnesota Department of Revenue Taxpayer Satisfaction with the Filing Process

Transcription

1 2007 Minnesota Department of Revenue Taxpayer Satisfaction with the Filing Process Prepared for: The Minnesota Department of Revenue July 2007

2 2007 Minnesota Department of Revenue Taxpayer Satisfaction with the Filing Process Prepared for: The Minnesota Department of Revenue Prepared by: Anderson, Niebuhr & Associates, Inc. Northpark Corporate Center 6 Pine Tree Drive Suite 200 Arden Hills, MN (651) July 2007

3 2007 Minnesota Department of Revenue Taxpayer Satisfaction with the Filing Process TABLE OF CONTENTS CONCLUSIONS... 1 BACKGROUND AND PURPOSE... 5 RESEARCH METHOD... 6 SUMMARY OF FINDINGS... 8 I. Method of Completing the Minnesota Income Tax Return... 8 II. Issues Related to Using a Tax Preparer III. Issues Related to Preparing Own Taxes IV. Taxpayer Filing Methods V. Issues Related to Filing Paper Return VI. Issues Related to Electronic Filing Methods V. Issues Related to Paying Additional Tax and Receiving Refunds VI. Troublesome Aspects of the Tax Filing Process VII. Awareness and Use of, and Satisfaction with, Services Provided by the Minnesota Department of Revenue VIII. Importance and Quality Perceptions of Various Issues Related to Filing Taxes IX. Quadrant Analyses: Importance and Quality Perceptions of Various Issues Related to Filing Taxes X. Sources of Information Used by Taxpayers XI. Demographic Variables APPENDIX: Survey Questionnaire

4 Conclusions This section of the report provides conclusions based on the results of the 2007 study. Results in 2007 are very similar to those in 2005; key differences will be noted throughout these conclusions. Methods of Completing Income Tax Returns About half of respondents completed their own taxes, while the other half used a paid tax preparer. However, residents who are younger, own their own homes, have less education, less income, live in outstate areas, or have complex filing situations are more likely to have used a paid tax preparer. (p. 8, 9) Respondents Who Used a Paid Tax Preparer In 2007, six in ten paid between $50 and $200 for preparer s services. Males, those with higher incomes, and those with complex filing situations are more likely to have paid more than $200 for services. (p. 10, 11) Most respondents chose to use a paid tax preparer because they trusted them to do it right, to avoid making mistakes, and to make sure they received all the deductions and credits to which they were entitled. Many also used a preparer because their taxes are too complicated to complete by themselves. (p. 12) Respondents Who Completed Their Own Taxes Most indicated that they prepared their own taxes out of habit or because it is easy to do. Cost was a reason for more than half the respondents, with even more renters claiming this as a reason for doing their own taxes. (p. 14, 15) Taxpayer Filing Methods and Satisfaction with Various Aspects For respondents who completed their own taxes, the paper return continues to be the most common filing method. Half filed their Minnesota income taxes using this method. However, four in ten prepared and filed electronically. Compared with 2005, fewer prepared their taxes electronically, but filed a paper form. Males, those with higher incomes, and those between 35 and 54 are most likely to prepare and file their returns electronically. (p. 16, 17) Issues Related to Filing Paper Returns Most respondents indicated they filed a paper return out of habit. Fewer than a third of respondents who filed a paper return did so because they were concerned about the security of electronic filing. However, those with less education were more likely to express this as a reason for their paper return. (p. 18, 19) More than eight in ten respondents who prepared and filed their taxes using paper are satisfied with the overall experience. Satisfaction ratings are high for all items related to their paper return, with highest ratings given to the availability of Minnesota tax forms and the accuracy of their calculations. (p. 20) However, dissatisfaction with the understandability of the instructions has increased since (p. 21) 1

5 Issues Related to Electronic Filing Methods The use of Internet websites to prepare returns has increased since 2005, with approximately seven in ten respondents in 2007 using this method. Far fewer used purchased software to prepare their own return. (p. 23) Roughly half of respondents who filed electronically paid $20 or less; however, about one-quarter paid more than $40. (p. 24) Nearly all who prepared their return electronically were satisfied with the overall experience with their software product. Respondents were most satisfied with (p. 25): How easy it was to use the software program The accuracy of the product s calculations The security of the website or software However, respondents in 2007 were more likely to be satisfied, rather than very satisfied, with many of the items related to electronic filing. (p. 26) Issues Related to Paying Additional Tax and Receiving Refunds The majority of respondents received a refund when they filed their taxes. However, more than one-third had to pay additional money or tax to the State of Minnesota. Those with complex filing situations and older respondents are more likely to have paid additional tax. (p. 29, 30) Most who had to pay additional money said they paid by check. Most paid by check out of habit, but nearly two in ten indicated they chose this method because they were concerned about the security of paying over the Internet. (p. 31, 32) Among respondents who received refunds, nearly six in ten opted to have them directly deposited into a bank account, while just over a third chose to receive a check in the mail. Direct deposit was the preferred method for younger respondents, for metro area respondents, for those with higher incomes and higher education, and for those whose filing situations were not complex. Most who chose to receive a paper refund check did so out of habit. (p. 34, 35, 37) Regardless of whether they received their refund in the mail or had it directly deposited into their account, respondents expressed satisfaction with the time it took to get the refund, although fewer respondents in 2007 were very satisfied with the timeliness of the refund. (p. 36) Awareness and Use of, and Satisfaction with Services Provided by the Minnesota Department of Revenue Respondents are most aware of the telephone assistance for taxpayers and the Department of Revenue website for downloading forms and instructions. Fewer than half are aware of the automated phone lines for ordering forms or for checking the status of their refund, or of the Department of Revenue website for checking their return status, or for links to electronic tax preparation websites. However, there has been no significant change in awareness or use of any Department of Revenue services since (p. 42) 2

6 The website is the most frequently used service, especially for downloading forms and instructions, obtaining general information about Minnesota taxes, and obtaining links to electronic tax preparation websites. (p. 46) Further, this awareness and use of the Department of Revenue website for services such as ordering forms and obtaining general information is even higher among homeowners, those who have higher incomes and more education, and who complete their own taxes. (p. 47, 48) Among respondents who have used a service, nearly all are satisfied with the interaction overall and with many specific aspects of service. Almost all expressed satisfaction with the accuracy of the information received and its usefulness. The amount of time spent getting information is the only area in which more than five percent of respondents expressed dissatisfaction, and significantly fewer in 2007 are very satisfied. (p. 49, 50) Importance and Quality Perceptions of Various Tax Filing Issues When asked to rate the importance of various issues regarding filing taxes, roughly half or more respondents indicated that all issues are very important. The most important issues are making the Minnesota tax forms easy to understand and complete and providing taxpayers with information about how their taxes are spent. (p. 51) However, when respondents rated the Department of Revenue service in these areas, they said several could use improvement. The quadrant analyses show that the Department of Revenue has one strength: making the tax forms easy to find or obtain; respondents rated both the importance and quality high in this area. Several other areas show room for improvement. (p. 58, 59) The area of greatest concern is in providing taxpayers with information about how their tax money is spent. For this particular issue, nearly nine in ten respondents think this is important, but only about four in ten think the Department of Revenue is performing well in this area. Other weaknesses: making forms easy to understand and complete and having Department of Revenue personnel available to help received high importance ratings and lower satisfaction ratings. (p. 58, 59) Future Use of the Internet in the Tax Filing Process When respondents were asked how likely they would be to use the Internet for a variety of tax filing experiences, more than four in ten indicated they would be very likely to use it to get tax forms and instructions. In addition, respondents are also likely to use the Internet to file or pay their taxes, and to get general information about Minnesota taxes. (p. 60) In general, respondents who are younger, are in higher income brackets, have higher education levels, and complete their own taxes are more likely to use many of these Internet services in the future. (p ) 3

7 Sources of Information Used by Taxpayers Respondents use a variety of sources to find answers to their questions about filing Minnesota income taxes or property tax refund claims. However, fewer respondents in 2007 reported using each of these sources of information. The most common source used is a volunteer or professional tax preparer; nearly half said they would seek this source to find answers to their questions. Respondents with lower levels of education, those from outstate areas, and people with complex filing situations are even more likely to contact a volunteer or professional tax preparer with questions. (p ) Printed forms and instructions and the Department of Revenue website are the next most commonly used sources of information. In addition, respondents in higher income brackets, with more higher education, who are younger, and those who completed their own taxes are much more likely than their counterparts to use the website as a source for finding answers to questions. (p ) Overall Year-to-Year Conclusions Overall, there has been very little change between the findings in 2005 and The use of electronic filing has changed little. However, more 2007 respondents reported using Internet websites rather than purchased software for completing their electronic returns. (p. 16, 23) In general, the results also indicate that e-filers tend to have higher incomes, are younger, and are more likely to live outside the metro area. (p. 17, 23) While satisfaction with various aspects of filing has changed little, there has been a shift from very satisfied, to simply satisfied. Fewer 2007 respondents are very satisfied with the following aspects, yet more are satisfied (p. 26, 36): The accuracy of the electronic filing product s calculations The overall experience with the software product The security of the website or software The value for the price paid when filing electronically The availability of help if they had questions when filing electronically The time it took to receive their Minnesota refund One specific area where the Department of Revenue has lost ground is having people available to help taxpayers. This service was determined to be a strength of the Department in While slightly fewer respondents in 2007 feel this service is highly important, it is now seen as a weakness, with fewer rating this service as excellent or good. (p. 58, 59) 4

8 Background and Purpose The Minnesota Department of Revenue wished to conduct a research study to assess Minnesota taxpayers satisfaction with the process of filing their Minnesota individual income taxes, and to compare the results to the previous survey conducted in Specifically, The Minnesota Department of Revenue sought to learn the following from Minnesota taxpayers: Methods of completing the Minnesota income tax return Issues related to using a tax preparer, such as type of preparer used, cost, and reasons why they use a preparer Issues related to preparing one s own taxes Types of taxpayer filing methods and taxpayer satisfaction with these methods Issues related to receiving a refund and paying additional income tax Awareness, use, and satisfaction with services provided by the Minnesota Department of Revenue Importance and perception of various issues related to filing taxes Sources of information used by taxpayers The Minnesota Department of Revenue retained the independent market research firm of Anderson, Niebuhr & Associates, Inc. to conduct this research. 5

9 Research Method This section of the report provides a description of the research method used to conduct the survey, including a description of the population and the sample, questionnaire design, data collection, and data analysis. Population and Sample The population of interest for this study is Minnesota residents at least 18 years old who filed Minnesota income taxes for Anderson-Niebuhr obtained a list of Minnesota households. From this list, Anderson-Niebuhr drew an equal probability random sample of 400 residents. This sample size yields results accurate within ±5% with a 95% confidence level when generalizing to the population of Minnesota households as a whole. Questionnaire Design The questionnaire is very similar to the one used in However, some revisions were made in consultation with Minnesota Department of Revenue representatives. A copy of the final version of the questionnaire can be found in the Appendix. Data Collection The survey was conducted using Anderson-Niebuhr s established telephone survey methods. Interviews were conducted using Computer Aided Telephone Interviewing (CATI) software. Data collection occurred from May 25, 2007 through June 30, A total of 400 resident surveys were completed. The response rate was 69 percent. 6

10 Data Analysis Anderson-Niebuhr, in consultation with Minnesota Department of Revenue representatives, defined the analyses to be performed. Anderson-Niebuhr s on-site computer facilities and computer programs contained in the Statistical Package for the Social Sciences (SPSS/Windows) were used to conduct the analyses. Complete descriptive responses are provided for all questionnaire items. The data are weighted based on the methods taxpayers used to file state income tax returns. Quadrant analyses were created based on the importance of various issues to taxpayers (e.g., making the Minnesota tax forms easy to find or obtain) and the quality provided by the Department of Revenue as perceived by respondents regarding these issues. These analyses can help the Department of Revenue determine their strengths, as well as identify areas of concern. To assess differences over time, crosstabulations were conducted between responses in 2005 and 2007 on all applicable questions. When significant differences are reported for year to year comparisons, the percentages are not reported in the text because they are already depicted in the graphic display. Statistical comparisons were also conducted to determine significant differences, or differences that are unlikely to be due to chance, between subgroups on selected questions based on income, age, place of residence, home ownership, gender, education level, complexity of filing procedures, and method of completing taxes. Various other crosstabulation analyses were also conducted. Only those comparisons showing significant differences are mentioned in the report under the heading, Other Findings. 7

11 Summary of Findings This section of the report presents the findings of Minnesota taxpayers experiences with the income tax filing process. Findings are shown separately for respondents who were surveyed in 2005 and Results are displayed in figures, followed by bulleted points describing the major findings in All statistically significant differences are reported under the heading Other Findings. Method of Completing the Minnesota Income Tax Return FIGURE 1 Q1. How did you file your income taxes this year? 100% 80% 60% 50% 50% 46% 44% 40% 20% 4% 6% 0% Paid tax preparer Volunteer tax preparer Completed yourself 2007 (N = 400) 2005 (N = 400) When asked what method they used to prepare their income tax forms this past year, half (50%) of all 2007 respondents said they used a paid tax preparer (Figure 1). Nearly half (46%) completed their own taxes and just four percent used a volunteer tax preparer. 8

12 Other Findings Income Respondents who earn less than $40,000 are more likely to have used a paid tax preparer, while those who earn more are more likely to have completed their own taxes. Paid tax preparer Completed own taxes Less than $40,000 55% 49% $40,000-$79,999 49% 52% $80,000 or more 47% 32% Age Respondents who are 35 to 54 are more likely than older or younger respondents to have completed their own taxes, while those who are 18 to 34 are more likely than those who are older to have used a paid tax preparer. Paid tax preparer Completed own taxes % 29% % 55% 55 or older 55% 41% Region Respondents from the Twin Cities seven-county metro area are more likely to have completed their own taxes and less likely to have used a paid tax preparer. Paid tax preparer Completed own taxes Metro area 45% 52% Outstate area 57% 39% Home Ownership Homeowners are more likely to have used a paid tax preparer, while renters are more likely to have used a volunteer tax preparer. Paid tax preparer Volunteer tax preparer Own 52% 3% Rent 32% 16% Education As education level increases, respondents are more likely to have completed their own taxes and less likely to have used a paid tax preparer. Paid tax preparer Completed own taxes High school diploma or less 61% 35% Some college/two-year degree 54% 40% College degree or higher 41% 57% Complexity of Filing Respondents with complex filing situations are more likely to have used a paid tax preparer, whereas those without complex situations are more likely to have completed their own taxes. Paid tax preparer Completed own taxes Complex 65% 31% Not complex 37% 59% 9

13 Issues Related to Using a Tax Preparer FIGURE 2 Q2. How much did you pay for the preparer s services?* Less than $50 6% 5% $50-$100 $101-$200 30% 30% 30% 38% $201-$300 More than $300 Don't know/ Refused 15% 10% 13% 11% 6% 6% 0% 20% 40% 60% 80% 100% 2007 (N = 200) 2005 (N = 201) *Only asked of respondents who used a paid tax preparer. Responses were split when respondents who used a paid tax preparer were asked how much they paid for the preparer s services (Figure 2). While more than one-third (36%) of respondents in 2007 paid $100 or less for their preparer s services, fewer paid between $101 and $200 (30%) or more than $200 (28%) to have their taxes prepared. Other Findings Income As income increases, respondents are less likely to have paid $100 or less to have their taxes prepared and more likely to have paid more than $200. $100 or less More than $200 Less than $40,000 57% 21% $40,000-$79,999 37% 27% $80,000 or more 25% 42% 10

14 Other Findings (Cont d) Gender Females are more likely than males to have paid $200 or less for tax preparer s services, while males are more likely to have paid more than $200. $200 or less More than $200 Female 78% 22% Male 63% 37% Complexity of Filing Taxpayers with complex filing situations who used a tax preparer are more likely to have paid more than $200, whereas those without complex situations are more likely to have paid $100 or less. $100 or less More than $200 Complex 30% 38% Not complex 52% 17% 11

15 FIGURE 3 Q3. Why did you use this tax preparer?* You trusted the preparer to do it right 99% 98% To avoid making mistakes on your taxes To make sure you received all the deductions and credits you were entitled to** 0% 89% 92% 91% Taxes are too complicated 76% 81% To save time 52% 52% 0% 20% 40% 60% 80% 100% Percent of respondents who said "Yes" 2007 (N = 216) 2005 (N = 225) *Only asked of respondents who used a paid or volunteer tax preparer. **New response option in When 2007 respondents who used a volunteer or paid tax preparer were asked why they did so, nearly all said it was because they trusted the preparer to do it right (99%). In addition, most also used a tax preparer to avoid making mistakes (92%) and to make sure they received all the deductions and credits to which they were entitled (91%) (Figure 3). In addition, eight in ten (81%) respondents said they used a tax preparer because taxes are too complicated, while more than half (52%) did so to save time. Other Findings Age Respondents who are 18 to 34 are more likely than those who are older to have used a paid tax preparer to save time. Save time % % 55 or older 47% 12

16 Other Findings (Cont d) Complexity of Filing Respondents with complex filing situations are more likely to have used a tax preparer because they believe taxes are too complicated. Too complicated Complex 87% Not complex 76% 13

17 Issues Related to Preparing Own Taxes FIGURE 4 Q4. Why did you prepare your own taxes?* Habit Preparing taxes is easy to do 80% 75% 78% 76% Cost 58% 67% To save time Not convenient to use a preparer 36% 30% 30% 29% Reluctant to share information about your finances** No preparer was available 0% 4% 2% 18% 0% 20% 40% 60% 80% 100% Percent of respondents who said "Yes" 2007 (N = 184) 2005 (N = 175) *Only asked of respondents who completed their own taxes. **New response option in Respondents who completed their own taxes were asked why they chose to do so (Figure 4). About eight in ten said they completed their own taxes out of habit (80%) or because preparing taxes is easy to do (78%). Nearly six in ten (58%) residents completed their own taxes because of the cost. In contrast, fewer than four in ten said they completed their own taxes to save time (36%) or because it was not convenient to use a preparer (30%). Fewer than two in ten (18%) said they completed their own taxes because they are reluctant to share information about their finances. 14

18 Other Findings Region Respondents from outstate areas are more likely to have completed their own taxes for the following reasons: Habit Not convenient to use a preparer Conversely, respondents from the metro area are more likely to have completed their own taxes because they were reluctant to share information about their finances. Reluctant to share Habit Not convenient to use a preparer information about their finances Metro area 75% 23% 22% Outstate areas 90% 43% 10% Home Ownership Respondents who rent are more likely than those who own their home to have completed their own taxes because of the cost. Cost Own 56% Rent 94% Gender Males are more likely than females to have completed their own taxes for the following reasons: Not convenient to use a tax preparer No preparer was available Not convenient to use a preparer No preparer was available Female 21% 0% Male 39% 7% Education As education level increases, respondents are less likely to have indicated they prepared their own taxes for the following reasons: Habit Reluctant to share information about their finances Reluctant to share information about their Habit finances High school diploma or less 97% 40% Some college/two-year degree 83% 17% College degree or higher 75% 12% 15

19 Taxpayer Filing Methods FIGURE 5 Q5. How did you file your Minnesota taxes?* 100% 80% 60% 40% 50% 44% 40% 35% 20% 10% 21% 0% Prepared and filed paper forms Prepared and filed electronically Prepared electronically, sent in paper forms 2007 (N = 184) 2005 (N = 175) *Only asked of respondents who completed their own taxes. When 2007 respondents who prepared their own taxes were asked how they filed their Minnesota return, half (50%) said they filed a paper return and four in ten (40%) prepared and filed their taxes electronically (Figure 5). Few (10%) residents prepared their taxes electronically, but sent in a paper form. Other Findings Comparisons: 2007 to 2005 Fewer respondents in 2007 prepared their taxes electronically, but sent in a paper form. 16

20 Other Findings (Cont d) Income Respondents who earn less than $80,000 are more likely to have prepared and filed their return using paper forms, while those who earn $80,000 or more are more likely to have prepared and filed their return electronically. Prepared and filed using paper forms Prepared and filed electronically Less than $40,000 56% 33% $40,000-$79,999 64% 27% $80,000 or more 38% 50% Age Respondents who are 55 or older are more likely to have prepared and filed their return using paper forms (55 or older=71% vs =40%). Those who are 35 to 54 are more likely to have prepared and filed their return electronically (35-54=45% vs. 55 or older=28%). *Due to small n sizes for year olds, their results are not included. Prepared and filed using paper forms % 45% 55 or older 71% 28% Gender Prepared and filed electronically Males are more likely than females to have prepared and filed their return electronically (male=50% vs. female=28%), while females are more likely to have completed their taxes using paper forms (female=63% vs. male=40%). Prepared and filed using paper forms Prepared and filed electronically Female 63% 28% Male 40% 50% 17

21 Issues Related to Filing Paper Return FIGURE 6 Q6. Why did you choose to send in a paper return instead of filing electronically?* (N = 92) Filing a paper return out of habit 76% Not sure how to file electronically 34% Concerned about the security of electronic filing 29% Concerned about the cost to electronically file 24% 0% 20% 40% 60% 80% 100% Percent of respondents who said "Yes" *Only asked of respondents who completed their own taxes and prepared and filed their taxes using paper forms. Respondents who prepared and filed their taxes using paper forms were asked why they did so (Figure 6). About three-quarters (76%) said they did so out of habit, while about onequarter or more indicated they filed using paper forms for the following reasons: Not sure how to file electronically (34%) Concerned about the security of electronic filing (29%) Concerned about the cost to electronically file (24%) Other Findings Gender Males are more likely than females to have indicated they chose to send in a paper return out of habit. Out of habit Female 45% Male 90% 18

22 Other Findings (Cont d) Education Respondents with a high school diploma or less are the most likely to have said they sent in a paper return instead of filing electronically because they were concerned about the security of electronic filing. Concerned about the security of electronic filing High school diploma or less 60% Some college/two-year 11% degree College degree or higher 35% 19

23 FIGURE 7 Q7. When you completed your paper return, how satisfied or dissatisfied were you with the following?* The availability of Minnesota income tax forms 34% 29% 61% 61% 8% 2% 3% 2% 2007 (N = 91) 2005 (N = 75) The accuracy of your calculations 33% 38% 65% 58% 2% 4% 2007 (N = 89) 2005 (N = 77) How easy the forms and schedules were to fill out 26% 24% 52% 64% 12% 8% 12% 2% 2007 (N = 91) 2005 (N = 77) Your overall experience with filing a paper return 24% 30% 61% 60% 8% 5% 10% 2% 2007 (N = 92) 2005 (N = 77) The understandability of the forms 20% 24% 64% 64% 8% 6% 12% 2% 2007 (N = 91) 2005 (N = 77) The helpfulness of the instructions 20% 21% 61% 67% 10% 7% 12% 2% 2007 (N = 89) 2005 (N = 75) How long it took to fill out the forms and schedules 18% 19% 63% 65% 10% 7% 16% 2% 2007 (N = 89) 2005 (N = 75) The understandability of the instructions 15% 22% 67% 64% 5% 8% 5% 14% 0% 20% 40% 60% 80% 100% 2007 (N = 89) 2005 (N = 77) Very satisfied Satisfied Neither satisfied nor dissatisfied Dissatisfied Very dissatisfied *Only asked of respondents who completed their own taxes and prepared and filed their taxes using paper forms. Respondents who answered "don t know" or "not applicable" were excluded from analysis. In 2005, respondents were not offered the neither satisfied nor dissatisfied option. Respondents in 2007 who prepared their own taxes and filed a paper return were asked how satisfied or dissatisfied they are with various aspects of the process (Figure 7). About one-third of these respondents are very satisfied with the availability of the Minnesota income tax forms (34%) and the accuracy of their calculations (33%). In addition, more than three-quarters of 2007 paper filers said they are very satisfied or satisfied with each of the other aspects: Their overall experience with filing a paper return (85% very satisfied/satisfied) The understandability of the forms (84%) The understandability of the instructions (82%) The helpfulness of the instructions (81%) How long it took to fill out the forms and schedules (81%) How easy the forms and schedules were to fill out (78%) However, at least one in ten 2007 respondents expressed dissatisfaction with the following: The understandability of the instructions (13% very dissatisfied/dissatisfied) How easy the forms and schedules were to fill out (10%) 20

24 Other Findings Comparisons: 2007 to 2005 More respondents in 2007 are very dissatisfied with the understandability of the instructions. Income Respondents who earn $80,000 or more or less than $40,000 are more likely than those in the middle to be very satisfied with the accuracy of their calculations when preparing their paper return. Accuracy of their calculations Very satisfied Less than $40,000 50% $40,000-$79,999 17% $80,000 or more 57% Age Respondents who are 35 to 54 are more likely than those who are older to be very satisfied with the accuracy of their calculations when completing their paper returns. *Due to small n sizes for year olds, their results are not included. Accuracy of their calculations Very satisfied % 55 or older 21% Region Respondents from the Twin Cities seven-county metro area are more likely than those from outstate areas to be very satisfied with the understandability of the instructions when they completed their paper return. Understandability of the instructions when they completed their paper return Very satisfied Metro area 24% Outstate areas 3% Home Ownership Respondents who own their homes are more likely than those who rent to be very satisfied with their overall experience with filing a paper return. Overall experience with filing a paper return Very satisfied Own 28% Rent 0% Gender When completing their paper returns, males are more likely than females to be very satisfied with the availability of Minnesota income tax forms. Availability of Minnesota income tax forms Very satisfied Female 24% Male 49% 21

25 Other Findings (Cont d) Education As education level increases, respondents are more likely to be very satisfied with the availability of Minnesota income tax forms. Availability of Minnesota income tax forms Very satisfied High school diploma or less 0% Some college/two-year degree 33% College degree or higher 43% Additionally, respondents who have attended some college or have a two-year degree are more likely to be very satisfied with how easy the forms and schedules were to fill out. How easy the forms and schedules were to fill out Very satisfied High school diploma or less 25% Some college/two-year degree 46% College degree or higher 17% 22

26 100% Issues Related to Electronic Filing Methods FIGURE 8 Q8. When you prepared your return electronically, did you use an Internet website such as TurboTax.com or purchase commercially available software (such as TaxCut or Quicken)?* 80% 71% 60% 48% 52% 40% 29% 20% 0% Internet website 2007 (N = 62) 2005 (N = 98) Purchased software *Only asked of respondents who completed their own taxes and prepared their return electronically. About seven in ten (71%) respondents who prepared their return electronically did so using an Internet website (Figure 8). The remainder (29%) used purchased software. Other Findings Region Respondents from the Twin Cities seven-county metro area are less likely than those from outstate areas to have used an Internet website such as TurboTax.com to prepare their return electronically. Internet website Metro area 63% Outstate areas 88% 23

27 FIGURE 9 Q9. How much did you pay to file your federal and state returns?* Free 21% 21% $5-$10 2% 10% $11-20 $21-$30 22% 17% 13% 15% $31-$40 More than $40 10% 20% 24% 25% 0% 20% 40% 60% 80% 100% 2007 (N = 92) 2005 (N = 99) *Only asked of respondents who completed their own taxes and prepared their return electronically. Respondents who prepared their own taxes electronically were asked how much they paid to file their federal and state returns (Figure 9). In 2007, about one-quarter (24%) paid more than $40. More than two in ten each paid $21-$40 (23%) or $11-$20 (22%), and ten percent paid $5-$10. About two in ten (21%) said filing their federal and state returns electronically was free. Other Findings Comparisons: 2007 to 2005 Respondents in 2007 are less likely than those in 2005 to have paid $31 to $40 to file their state and federal returns electronically, and more likely to have paid $5 to $10. 24

28 FIGURE 10 Q10. When you prepared or filed your return electronically, how satisfied or dissatisfied were you with the following?* How easy it was to use the software program 2007 (N = 92) 2005 (N = 98) 52% 56% 45% 42% 3% 2% Your overall experience with the software product 42% 59% 56% 41% 2% The accuracy of the product's calculations 40% 64% 55% 30% 3% 2% 3% 3% The security of the website or software 36% 59% 58% 33% 3% 3% % 2005 The total time spent completing the filing process 29% 36% 61% 56% 5% 4% 3% 2% 2% 2% Value for price paid 29% 54% 60% 37% 3% 6% 5% 2% 4% The availability of help if you had questions 13% 27% 47% 42% 16% 6% 12% 2% 18% 17% 0% 20% 40% 60% 80% 100% Very satisfied Satisfied Neither satisfied nor dissatisfied Dissatisfied Very dissatisfied Don't know/not applicable *Only asked of respondents who completed their own taxes and prepared their return electronically. In 2005, respondents were not offered the neither satisfied nor dissatisfied option Respondents who prepared their own taxes electronically were asked how satisfied or dissatisfied they are with various aspects of the process (Figure 10). More than half (52%) of these residents are very satisfied with how easy it was to use the software program. In addition, at least eight in ten are very satisfied or satisfied with the following aspects: Their overall experience with the software product (98% very satisfied/satisfied) The accuracy of the product s calculations (95%) The security of the website or software (94%) The total time spent completing the filing process (90%) Value for the price paid (89%) Fewer (60%) electronic filers are very satisfied or satisfied with the availability of help if they had questions; however, nearly two in ten (18%) did not rate this aspect. 25

29 Other Findings Comparisons: 2007 to 2005 Respondents in 2007 are less likely than those in 2005 to be very satisfied and are more likely to be satisfied with the following aspects of filing their return electronically: The accuracy of the product s calculations Their overall experience with the software product The security of the website or software Value for the price paid The availability of help if they had questions Income Respondents who earn $40,000 or more are more likely than those who earn less to be very satisfied with value for the price paid when they prepared or filed their return electronically. Value for the price paid Very satisfied Less than $40,000 0% $40,000-$79,999 39% $80,000 or more 38% Age Respondents who are 35 to 54 are more likely than those who are older to be very satisfied with the availability of help if they had questions when preparing their return electronically. *Due to small n sizes for year olds, their results are not included. Availability of help if they had questions Very satisfied % 55 or older 7% Home Ownership Respondents who own their homes are more likely than those who rent to be very satisfied with how easy it was to use the software program when they prepared their return electronically. How easy it was to use the software program Very satisfied Own 54% Rent 0% 26

30 Other Findings (Cont d) Gender When preparing or filing their returns electronically, males are more likely than females to be very satisfied with the following: How easy it was to use the software program Value for the price paid The total time spent completing the filing process The availability of help if they had questions How easy it was to use the software program Very satisfied Female 40% Male 57% Value for the price paid Female 11% Male 39% The total time spent completing the filing process Female 14% Male 36% The availability of help if they had questions Female 4% Male 21% Education When preparing or filing their taxes electronically, respondents who have a college degree or higher education are more likely to be very satisfied with the following: Value for the price paid The availability of help if they had questions Value for the price paid Very satisfied High school diploma or less 24% Some college/two-year degree 4% College degree or higher 46% The availability of help if they had questions High school diploma or less 7% Some college/two-year degree 0% College degree or higher 26% Complexity of Filing Respondents with complex filing situations who prepared their return electronically are more likely than others to be very satisfied or satisfied with the availability of help if they had questions. The availability of help if they had questions Very satisfied/satisfied Complex 95% Not complex 62% 27

31 FIGURE 11 Q11. After you prepared your return electronically, why did you choose to send in a paper return instead of filing the return electronically?* Concerned about the cost to electronically file 42% 46% Filing a paper return out of habit 29% 33% Concerned about the security of electronic filing 8% 33% Not sure how to file electronically 8% 8% 0% 20% 40% 60% 80% 100% Percent of respondents who said "yes" 2007 (N = 18) 2005 (N = 37) *Only asked of respondents who completed their own taxes and prepared their return electronically, but sent in a paper form. Respondents who prepared their taxes electronically, but filed a paper return were asked their reason for doing so (Figure 11). About four in ten (42%) said they filed a paper return because they are concerned about the cost to electronically file and one-third (33%) filed a paper return out of habit. Fewer than one in ten said they filed a paper return because they are concerned about the security of electronic filing or because they are not sure how to file electronically (8% each). Other Findings Comparisons: 2007 to 2005 Respondents in 2007 are less likely than those in 2005 to be concerned about the security of electronic filing. 28

32 Issues Related to Paying Additional Tax and Receiving Refunds FIGURE 12 Q12. When you or your preparer filed your Minnesota income taxes, did you have to pay additional money or tax to the State of Minnesota, or receive a refund from the State of Minnesota? Pay 36% Refund 62% 30% Pay 60% 4% Refund Don't know 8% Don't know 2007 (N = 400) 2005 (N = 400) Six in ten (60%) 2007 respondents received a refund, while more than one-third (36%) had to pay additional money or tax to the state (Figure 12). Other Findings Age Older respondents are more likely to have paid additional money or tax to the State of Minnesota, and less likely to have received a refund. Paid additional money or tax Received a refund % 83% % 64% 55 or older 44% 56% 29

33 Other Findings (Cont d) Complexity of Filing More respondents with complex filing situations had to pay additional money or tax to the State of Minnesota, while those without complex tax situations received a refund. Paid additional money or tax Received a refund Complex 49% 51% Not complex 28% 72% 30

34 FIGURE 13 Q13. Which payment method did you use?* Pay by check (personal or cashier's check) 82% 86% Pay over the Internet 8% 11% Pay by credit card 2% 1% Another payment method 4% 3% Don't know 0% 3% 0% 20% 40% 60% 80% 100% 2007 (N = 144) 2005 (N = 120) *Only asked of respondents who had to pay additional money or tax to the State of Minnesota. Of those who paid additional money or tax, more than eight in ten (86%) paid by check (Figure 13). Just eight percent paid their additional tax over the Internet. Other Findings Income Higher-income respondents are less likely to pay their additional tax by check, and more likely to pay over the Internet. Check Internet Less than $40,000 97% 0% $40,000-$79,999 85% 4% $80,000 or more 82% 19% Home Ownership Homeowners are more likely than renters to have paid their additional tax by check (own=88% vs. rent=75%). Check Own 88% Rent 75% 31

35 FIGURE 14 Q14. Why did you choose to pay by check?* (N = 124) Paid by check out of habit 57% Concerned about the security of paying over the Internet 18% Didn't want to pay before the deadline 11% Weren't familiar with making payments over the Internet 8% Don't know 6% 0% 20% 40% 60% 80% 100% *Only asked of respondents who paid additional money or tax to the State of Minnesota using a check. More than half (57%) of respondents who paid by check said they did so out of habit (Figure 14). In addition, nearly two in ten (18%) indicated they paid by check because they are concerned about the security of paying over the Internet. About one in ten each paid additional money or tax to the state by check because they didn t want to pay before the deadline (11%) or because they weren t familiar with making payments over the Internet (8%). Other Findings Gender More females than males were concerned about the security of paying over the Internet, while more males chose to pay by check out of habit. Concerned about the security of paying over the Internet Out of habit Female 30% 53% Male 9% 70% 32

36 Other Findings (Cont d) Complexity of Filing Respondents with complex filing situations are more likely to have paid by check out of habit, while those without complex filing situations are more likely to have paid by check because they didn t want to pay before the deadline. Didn t want to pay before the Out of habit deadline Complex 65% 5% Not complex 50% 24% 33

37 FIGURE 15 Q16. How did you receive your Minnesota refund?* Have the refund direct deposited into your bank account 52% 59% Get a refund check in the mail 36% 43% Don t know/receive it by another method 5% 5% 0% 20% 40% 60% 80% 100% 2007 (N = 238) 2005 (N = 246) *Only asked of respondents who received a refund from the State of Minnesota. Figure 15 shows that among 2007 respondents who received a state tax refund, about six in ten (59%) chose to have the refund directly deposited into their bank account, while more than one-third (36%) chose to get a refund check in the mail. Other Findings Income As respondents income increases, they are less likely to have received their refund check in the mail, and are more likely to have had their refund directly deposited into their bank account. In the mail Directly deposited Less than $40,000 55% 46% $40,000-$79,999 39% 60% $80,000 or more 26% 68% 34

38 Other Findings (Cont d) Age As age increases, respondents are more likely to have received their refund check in the mail. Younger respondents are more likely to have had their refund direct deposited into their bank account. In the mail Directly deposited % 83% % 70% 55 or older 54% 42% Region Respondents from the Twin Cities seven-county metro area are more likely to have had their refund directly deposited into their bank account, while those from outstate areas are more likely to have gotten their refund check in the mail. In the mail Directly deposited Metro area 30% 67% Outstate areas 46% 51% Education As education level increases, respondents are more likely to have had their refund directly deposited into their bank account, and less likely to have received their refund check in the mail. In the mail Directly deposited High school diploma or less 57% 41% Some college/two-year degree 41% 59% College degree or higher 25% 69% Complexity of Filing Respondents with complex filing situations are more likely to have received their refund check in the mail, while those without complex filing situations are more likely to have had their refund directly deposited into their bank account. In the mail Directly deposited Complex 55% 37% Not complex 25% 75% 35

39 FIGURE 16 Q15. How satisfied or dissatisfied were you with the time it took to get your Minnesota refund?* Direct deposited into bank account 54% 69% 42% 28% 1% 3% 1% 2% 2007 (N = 140) 2005 (N = 128) Received check in the mail 45% 50% 51% 42% 4% 4% 2% 2% 2007 (N = 86) 2005 (N = 105) Refund methods combined 48% 59% 44% 34% 2% 4% 2% 1% 2% 4% 2007 (N = 238) 2005 (N = 246) 0% 20% 40% 60% 80% 100% Very satisfied Satisfied Neither satisfied nor dissatisfied Dissatisfied Very dissatisfied Don't know/not applicable *Only asked of respondents who received a refund from the State of Minnesota. In 2005, respondents were not offered the neither satisfied nor dissatisfied option. Respondents who received a state tax refund were asked how satisfied or dissatisfied they are with the time it took to get their money (Figure 16). Overall, more than nine in ten (92%) are very satisfied or satisfied. Over half (54%) of those who opted to have their refund directly deposited into a bank account are very satisfied, while slightly fewer respondents who received their refund in the mail said they are very satisfied (45%) with the length of time. However, regardless of the method, very few showed any dissatisfaction with the amount of time it took to receive their refund (combined=4%, direct deposit=3%, mail=4%). Other Findings Comparisons: 2007 to 2005 Respondents were less likely than those in 2005 to be very satisfied with the time it took to get their Minnesota refund, and are more likely to be satisfied. 36

40 FIGURE 17 Q17. Why did you choose to receive a paper refund check instead of having it deposited directly to your bank account?* (N = 86) Used to receiving a paper refund and did so out of habit 60% Concerned about the security of direct deposit 12% Unwilling to provide your bank account information 12% Unfamiliar with direct deposit 4% Don't know 12% 0% 20% 40% 60% 80% 100% *Only asked of respondents who received a refund from the State of Minnesota and received their refund in a check. Of those who received a refund check in the mail, six in ten (60%) chose this method out of habit (Figure 17). Far fewer (12% each) chose to receive a paper refund because they were concerned about the security of direct deposit or they were unwilling to provide their bank account information. Other Findings Gender More females than males chose to receive a paper refund because they are concerned about the security of direct deposit, while more males chose a paper refund out of habit. Concerned about security of direct deposit Out of habit Female 24% 59% Male 3% 78% 37

41 Other Findings (Cont d) Education More respondents with a high school diploma or less chose to receive a paper refund check because they are used to that method and did so out of habit. Out of habit High school diploma or less 84% Some college/two-year 62% degree College degree or higher 60% 38

42 Difficult Aspects of the Tax Filing Process FIGURE 18 Q18. Which aspect of the overall Minnesota and federal income tax filing process do you find the most difficult? Understanding the instructions for completing your return Gathering financial records such as W-2s, 1099s, etc. 21% 22% 17% 23% The time needed to complete your return 8% 9% The cost to file taxes 5% 11% None is difficult 15% 28% All are equally difficult Refused 2% 2% 5% 19% 0% 20% 40% 60% 80% 100% 2007 (N = 400) 2005 (N = 400) When asked which aspect of the overall Minnesota and federal income tax filing process they find the most difficult, 2007 respondents most commonly mentioned understanding the instructions for completing their return (21%) and gathering financial records, such as W-2s, 1099s, etc. (17%) (Figure 18). Fewer than one in ten mentioned each of the following aspects as being the most troublesome: The time needed to complete their return (8%) The cost to file taxes (5%) Nearly three in ten (28%) said none of these aspects is difficult, and nearly two in ten (19%) believe all are equally difficult. 39

43 Other Findings Comparisons: 2007 to 2005 Respondents in 2007 are less likely to believe gathering financial records such as W-2s, 1099s, etc. and the cost to file taxes are the most difficult aspects of the filing process, and they are more likely to have indicated that either none of the aspects are difficult or that they are all equally difficult. Income As respondents income increases, they are more likely to believe gathering financial records such as W-2s, 1099s, etc. is the most difficult part of the filing process. In contrast, those who earn $40,000 or more are less likely to have said that understanding the instructions for completing their return is the most difficult part of filing taxes. Respondents who earn $40,000 to $79,999 are more likely than those who earn more or less to believe that none of the aspects of filing taxes is difficult. Understanding the Gathering financial records such as W- 2s, 1099s, etc. instructions for completing their return None of the aspects Less than $40,000 9% 31% 25% $40,000-$79,999 16% 20% 35% $80,000 or more 23% 17% 23% Home Ownership Respondents who own their homes are more likely to have indicated that gathering financial records such as W-2s, 1099s, etc. is the most difficult aspect of the filing process, while more renters indicated that understanding the instructions for completing their return is the most difficult. Gathering financial records such as W-2s, 1099s, etc. Understanding the instructions for completing their return Own 18% 20% Rent 9% 44% Education As education level increases, respondents are more likely to have indicated that gathering financial records such as W-2s, 1099s, etc. is the most difficult part of the filing process, and less likely to have said that all aspects are equally difficult. Respondents with a high school diploma or less are more likely to have stated that understanding the instructions for completing their return is the most difficult part of filing taxes Gathering financial records such as W-2s, 1099s, etc. Understanding the instructions for completing their return All aspects are equally difficult High school diploma or less 5% 27% 28% Some college/two-year degree 17% 22% 21% College degree or higher 23% 15% 19% 40