T1 Worksheet and Schedule 1 Focus Groups

Prepared for the:
Public Affairs Branch
Canada Revenue Agency
FINAL REPORT
March 2007
POR# 361-06
Contract # 4655883416

Prepared by:
Sage Research Corporation

Le rapport complet en français sera fourni sur demande.

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Notes on terminology used in the report

Executive Summary

In recent years, many new non-refundable tax credits (NRTCs) have been implemented for the personal income tax return, and it is expected that more will be added in the future. The federal NRTCs are entered on Schedule 1, and the provincial NRTCs are entered on provincial Form 428 (except for Quebec, each province has its own version of Form 428). Because of the growing number of NRTCs, it will be increasingly difficult to place them on the current federal and provincial tax forms.

Currently, the front page of both Schedule 1 and Form 428 contains a tax on taxable income calculation and entry of NRTCs. Two alternative revised versions of the tax forms were developed for testing. Both revised versions involve moving the tax calculation off the first page, thereby creating more room on the first page for the NRTC section. The differences between the two revised versions are:

• Page 2 design: The tax calculation is moved to the second page of Schedule 1 (the reverse side), and the second page of Form 428.
• Worksheet design: The tax calculation is removed from Schedule 1 and Form 428. Where the tax calculation is moved to depends on the version of the return used:
  • T1 Special: tax calculations are moved to the Federal Worksheet and the Provincial Worksheet
  • T1 Special for retired seniors (T1S-A): the federal tax calculation is moved to the tax guide (which in the case of this return is where other federal calculations are done such as the Age Amount, the Pension Income Amount, etc.), and the provincial tax calculation is moved to the Provincial Worksheet.

Note that the design changes would also affect the T1 General, but for testing purposes the shorter T1 Special was used.

The purpose of the research was to get taxpayer feedback on the two alternative approaches to the design of Schedule 1, Form 428, and the associated worksheets. The primary research objectives included assessment of taxpayers' success in calculating total tax payable when using the two different approaches, identification of whether either of the revised approaches is associated with a greater or lesser likelihood of error, identification of the sources of any errors, and taxpayers' preferences for the two alternative approaches.

In February and March 2007, seven focus groups were conducted (six English and 1 French) in Ottawa, Vancouver and Moncton, with people who had completed their last tax return by hand and with at most only a little help. Six of the groups focused on the T1 Special return and were with people 18-64 years of age. One focus group focused on the T1S-A return and was conducted with retired people 65 years of age or older with a personal income of less than $50,000 and who did not report on their last tax return any capital gains, employment income, or self-employment income. Using hypothetical scenarios, participants completed the tax forms associated with each design alternative, and discussed their reactions. Copies of the tax forms associated with each design alternative can be found in the Appendix.

Removal of the Tax Calculation from the First Page of Schedule 1 and Form 428

In both the Page 2 and Worksheet designs, the tax calculation was removed from its current location on the first page of Schedule 1 and Form 428. Overall, the absence of the tax calculation on the first page of Schedule 1 and Form 428 did not, in and of itself, lead to any problems for the participants when completing the forms in the focus groups:

• Almost none of the participants noticed this change from the current forms, and none of the participants reported any hesitations or difficulties completing the first page of Schedule 1 or Form 428 because of a perceived absence of the tax calculation.
• The Page 2 design provided a solution for where to place the tax calculation: it was widely perceived as placing the tax calculation in an appropriate location, and there was a high level of success in completing the tax calculation using this design.

Page 2 versus Worksheet Designs

Almost all participants preferred the Page 2 design, and many strongly preferred it. Basically, participants perceived the Page 2 design as being easier to do because there is no need to go to another form to do the tax calculation.

The behavioural results in completing the forms also favoured the Page 2 design. In the case of the Page 2 design, there were no difficulties completing the tax calculation associated with the location of the tax calculation step on Schedule 1/Form 428. In the case of the Worksheet design, there was one key problem point -- namely, line 22 on Schedule 1, which is the point where the taxfiler is referred to the Federal Worksheet to do the federal tax calculation (“Calculate your federal tax for line 22 on the Federal Worksheet”):

• Most participants reported having difficulty at this point in figuring out where to go.
• The majority of participants did eventually figure out where to go, but a substantial minority had more serious difficulty:
  • Some participants got stuck at line 22 on Schedule 1, and had to be helped by the moderator.
  • Some participants put in a wrong amount for federal tax on Schedule 1, or left it blank, because of not appropriately using the tax calculation section on the Federal Worksheet.

The main sources of difficulty participants had with following the line 22 instruction on Schedule 1 of the Worksheet design were:

• The language of the instruction and understanding the instruction itself
• Finding “line 22” on the Federal Worksheet
• A perception that it is necessary to do all of the Federal Worksheet

Similar difficulties applied to the analogous instruction on the Worksheet version of Form 428, although because participants attempted the federal tax first, a number had figured out what to do when they came to relevant line of Form 428.

A key to improving success rates with the Worksheet design approach will be helping people to deal with the instruction at line 22 of Schedule 1. In this regard, participants made suggestions for changes involving wording, placement of the tax calculation section in the Federal Worksheet, and the design of the Federal Worksheet. For example:

• Wording of the line 22 instruction: Refer to the Federal Worksheet before referring to line 22, and use an action verb such as “go to” or “use.” The idea is to immediately communicate that the person needs to leave Schedule 1 and go to the Federal Worksheet.
  
  
• Placement of the tax calculation section in the Federal Worksheet: A number of participants suggested moving the tax calculation section to the beginning of the Federal Worksheet in order to make this section easier and faster to find, particularly given that all taxfilers would have to do the tax calculation, but not all would have to do the other sections of the Federal Worksheet.
  
  
• Graphic design of the Federal Worksheet: Some participants said the section headings on the Federal Worksheet do not stand out. In this context, virtually all participants preferred the graphic design of the Provincial Worksheet in terms of its use of colour, font size, and white space. Participants suggested the same approach should be used on the Federal Worksheet, except using blue instead of pink.