Suppose the probability of an IRS audit is 5.2 percent for U.S. tax payers who file form 1040 and who earned $100,000 or more. A. What are the odds that the taxpayer will be audited?

Question

There is a second part to the question that says. B. What are the odds against such tax payer being audited?

Answer 1

We have P(audited) = 0.052, which gives us P(not audited) = 1 - P(audited) = 1 - 0.052 = 0.948.

Odds of being audited = P(audited) / [ 1 - P(audited) ] = 0.052 / 0.948 = (approximately) 0.055

Odds of not being audited = P(not audited) / [ 1 - P(not audited) ] = 0.948 / 0.052 = (approximately) 18.231