SAS tax calculator - Test 1
Here we compare the aggregate absolute difference between the calculated quantites using TAXCALC and the SOI editor's version of the taxpayer's own calculation. These are presented both as dollar amounts and as a percentage of the edited value.
Differences may occur because of calculator, taxpayer or editor error, or because we have chosen a different definition of tax liability, or we ignore available data. In particular, for 2001 and 2003 we include advance payments as a reduction in tax, the SOI does not.
The sample here is the edited confidential full sample of returns (the INSOLE files) but restricted to taxpayers with abs(AGI) less than one million dollars. These were the returns made available to the author by the SOI for most years.
We do ignore some available data, in particular the form 6251 asks for itemized deduction and capital gains data "as adjusted for the AMT". Also the Net Investment Income Tax (2013+) has similar fields. If we simply used the numbers available on the Form 6251 then caclulations of the marginal tax rate on capital gains or certain itemized deductions by the method of finite difference would fail to include the AMT or NIIT, unless the user was savy enough to locate and change all the places where those items were used. Also, the EITC wage value is not exactly the sum of E00200 (wages) and E00900 (Schedule C), though the R**2 on that is .95. So we default to using the values from the 1040 and accept that improving the marginal rate calculation sacrifices some accuracy in the calculation of the level of tax. There is an option to us the "as adjusted" values:
Here are the results: