The Internal Revenue Service (IRS) has come under a great deal of criticism in recent years for various actions it is purported to have taken against U.S. citizens related to collecting federal income taxes. The IRS is also criticized for the complexity of the tax code, although the tax laws are actually written by congressional staff and passed by Congress. For the past few years, one of the country’s biggest tax-preparing companies has sponsored an event in which 50 certified public accountants from all sizes of CPA firms are asked to determine the tax owed for a fictitious citizen. The IRS is also asked to determine the “correct” tax owed. Last year, the “correct” figure stated by the IRS was $11,560. The file Taxes contains the data for the 50 accountants.
a. Compute a new variable that is the difference between the IRS number and the number determined by each accountant.
b. For this new variable computed in part a, develop a frequency distribution.
c. For the new variable computed in part a, determine the mean, median, and standard deviation.
d. Determine the percentile that would correspond to the “correct” tax figure if the IRS figure were one of the CPA firms’ estimated tax figures. Describe what this implies about the agreement between the IRS and consultants’ calculated tax.