Question

Suppose the probability of an IRS audit is 3. 8 percent for U. S. Taxpayers who file form 1040 and who earned $100,000 or more. What are the odds that such a taxpayer will be audited? (Round your answers to the nearest whole number. ) What are the odds against such a taxpayer being audited? (Round your answers to the nearest whole number. )

Answer 1

The probability of an IRS audit is 3.8%, so the odds of being audited are: odds of being audited = (probability of being audited) / (probability of not being audited)

= 0.038 / (1 - 0.038)

= 0.0395

Rounding to the nearest whole number, the odds of being audited are 0.04 or 1 in 25.

The odds against being audited are:

odds against being audited = (probability of not being audited) / (probability of being audited)

= (1 - 0.038) / 0.038

= 25.71

Rounding to the nearest whole number, the odds against being audited are 26 or 26 to 1.