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DATA FOR STATES AND TERRITORIES

Tabulation of income by States and Territories from the income tax returns does not represent the geographic distribution of income. There is no way to determine from the income tax returns the amount of income originating in the respective States. Data shown in this report for States and Territories are based entirely on the collection district in which the return was filed. Individual returns may be filed either in the collection district in which the individual resides or in the district in which his principal place of business is located.

The number of returns, amount of salaries and wages, dividends, interest, adjusted gross income, and tax liability, distributed by the State or Territory in which the return was filed, are tabulated in basic table 11. Basic table 12 shows the number of returns, adjusted gross income, and tax liability, for each State and Territory, by adjusted gross income classes the intervals of which are established especially for this tabulation. Data for returns with a District of Columbia address are tabulated separately although filed in Maryland. Returns showing an adjusted gross deficit are not included in these tables.

INCOME TAX LIABILITY COMPARED WITH TAX COLLECTIONS

The income tax liability reported on individual returns for 1948, tabulated in this report, differs from the individual income tax collections for the calendar year 1948 as reported by the Treasury Department. The difference is due to numerous factors. The tax collections for 1948 include items which are not applicable to the 1948 individual tax liability; also a portion of the 1948 individual income tax liability is not paid until after December 31, 1948. Some of the significant variations between the two series are:

(a) Taxes paid on fiduciary income tax returns, Form 1041, covering the income year 1947, filed during 1948, are included in the individual income tax collections for 1948.

(b) The final payment made by individuals on the Declaration of Estimated Tax for 1947, Form 1040-ES, due January 15, 1948, and the payment of any balance due on individual returns, Forms W-2 and 1040, for 1947, which are filed on or before March 15, 1948, are included in the 1948 collection figures. These final tax payments include the entire 1947 tax of persons not subject to withholding who made no previous payments on a declaration. Among the latter persons are many farmers who, under certain conditions, were permitted to postpone filing a declaration until January 15, 1948.

(c) Taxes withheld by employers on wages paid during the last quarter of 1947 are received by collectors, in January 1948.

(d) Tax collections include penalties, interest, and back taxes pertaining to prior years, which are not a part of the 1948 tax liability. Additional assessments, resulting from audit and included in collections, are not a part of the tax liability reported by the taxpayer, even though they pertain to the income year 1948.

(e) Collections include the tax reported on Forms 1040C, 1040D, 1040NB, 1040NB-a, none of which is included in this report. Forms 1040C and 1040D are returns for departing aliens; Forms 1040NB

ness within the United States and not having a place of business therein.

(f) The entire tax liability reported on individual returns for 1948 which are taxed under section 107 of the Code, if paid during 1948, is included in the collection figures; but in this report, the portion of tax attributable to prior years is excluded from the tax liability.

(g) Collections include the overpayment of tax which is refundable; tax overpayment is not a part of the tax liability in this report.

(h) Collections for 1948 do not include the final balance of tax due on 1948 returns (due January-March 15, 1949), the last payment on 1948 declaration of estimated tax (due January 15, 1949), nor any of the estimated tax on the 1948 declaration of farmers who file their original declaration on January 15, 1949.

(i) Taxes on fiscal year returns and part year returns for the two series do not coincide. Collections include the tax on all such returns received during 1948, while this report includes fiscal year returns ending within the period July 1948 through June 1949 and part year returns with the greater number of months in 1948.

DESCRIPTION OF THE SAMPLE AND LIMITATIONS OF DATA

The statistical program with respect to individual income tax returns filed for the tax year 1948 called for extensive classifications and tabulations on a total United States basis, and for a distribution of returns, income, and tax, by size of income, as well as aggregates of selected items, for each State. To accomplish this program, a stratified sample was prescribed, with uniform representation of all States according to the same sample ratio at each level of stratification. The various strata established for sampling purposes were determined largely with reference to the classification and reporting systems adhered to by collectors in their administrative processing of returns. The sampling methods prescribed for each of the sampling strata were determined in such manner as to satisfy the requirements of randomness, without unduly interrupting or complicating the collectors' fundamental duties of assessment, collection, and refunding of tax.

There are discussed below the composition of the sample, the selection methods prescribed, the universe sizes, the weighting procedures, and the limitations of the data in terms of sampling variability. The stratification pattern evolved for 1948 is discussed in terms of (a) the thirteen major population groups available in collectors' offices for sampling; (b) the further two-way subdivision of each of three of these groups, introduced for purposes of reducing sampling variability, yielding a total of sixteen classes; and (c) the four composite strata employed for estimating purposes. A table is presented on page 49 showing, for each of the four estimating strata, the number of returns in the universe, and the number of returns in the sample.

COMPOSITION OF THE SAMPLE

Individual income tax returns for 1948 include returns filed on Form 1040A and returns filed on Form 1040. Returns filed on Form 1040 are segregated in collectors' offices into two groups-(1) returns

inafter referred to as collector returns, Form 1040, and (2) returns under the audit jurisdiction of the internal revenue agent in charge, hereinafter referred to as agent returns, Form 1040. Collector returns, Form 1040, are those showing adjusted gross income under $7,000 and total receipts from business, if any, under $25,000. Agent returns, Form 1040, are those showing adjusted gross income of $7,000 or more or total receipts from business of $25,000 or more. Agent returns, Form 1040, are sorted into two classes, one for returns with adjusted gross income under $25,000, and the other for returns with adjusted gross income $25,000 or more.

Returns in each of the four primary categories-Form 1040A, collector Form 1040, agent Form 1040 with adjusted gross income under $25,000, and agent Form 1040 with adjusted gross income $25,000 or more-are further segregated according to year-end adjustment in tax status, determined by comparison of tax liability with withholding and declaration payments, into three basic groupsnamely, (a) taxable assessable, (b) overpayment, and (c) even. Taxable assessable returns are taxable returns showing tax withheld and payments on declaration of estimated tax totaling less than tax liability. Overpayment returns are (1) taxable returns showing tax withheld and payments on declaration of estimated tax in excess of tax liability, and (2) nontaxable returns showing tax withheld and/or payments on declaration of estimated tax. Even returns are (1) taxable returns showing tax withheld and payments on declaration of estimated tax equal to tax liability, and (2) nontaxable returns showing no tax withheld or payments on declaration of estimated tax. Separate classes and controls are provided for taxable even returns and for nontaxable returns with no prepayments in the Form 1040A areas, so that four basic groups are considered for this body of returns. For administrative purposes, additional categories within the basic groups outlined above are provided in the segregation procedures, but separate controls are not maintained for such categories, and they are not distinguished for sample selection purposes. In summary, the 13 population groups constituting the sample selection strata for 1948 are as follows:

Form 1040A:

(1) Taxable assessable

(2) Overpayment

(3) Taxable even

(4) Nontaxable no prepayment

Collector Form 1040:

(5) Taxable assessable

(6) Overpayment

(7) Even

Agent Form 1040 with adjusted gross income under $25,000:

(8) Taxable assessable

(9) Overpayment

(10) Even

Agent Form 1040 with adjusted gross income $25,000 or more:

(11) Taxable assessable

(12) Overpayment

(13) Even

For sample purposes, 1 percent coverage was prescribed for returns in each of the above groups (1) to (7), inclusive. Returns in the three

gross income under $10,000 and those with adjusted gross income from $10,000 to $25,000. Ten percent coverage was prescribed for the "Under $10,000" adjusted gross income elements among groups (8), (9), and (10), and 20 percent for returns with adjusted gross income from $10,000 to $25,000. One hundred percent coverage was prescribed for returns in groups (11), (12), and (13)-namely, those with adjusted gross income $25,000 or more. A total of 16 strata, comprising a single stratum for each of the classification groups (1) to (7), inclusive; two strata for each of the classification groups (8), (9), and (10); and a single stratum for each of the classification groups (11), (12), and (13) were thus distinguished for sample selection purposes. The 1, 10, 20, and 100 percent coverages specified for the various sampling strata were uniformly applicable to returns filed in each of the collection districts. Precise 1, 10, and 20 percent samples were not achieved, principally because of the particular sampling techniques employed. Accordingly, the universe populations relating to the separate strata distinguished for sample selection purposes were independently determined and compared with the corresponding samples. The weighting factors made allowances for the deviation of actual sample sizes from prescribed sample sizes.

SELECTION OF THE SAMPLE

As returns, Form 1040, were received in collectors' offices, they were assigned serial numbers and blocked in units of 100 returns having consecutive serial numbers ending in "00" to "99," inclusive. The serial number, less the ending two digits thereof, constituted the block number, which was identical for all returns within a block. Separate series of numbers were provided for collector returns, agent returns with adjusted gross income under $25,000, and agent returns with adjusted gross income $25,000 or more. Within each of these categories, separate series of numbers were provided for taxable assessable returns, overpayment returns, and even returns. "Short" blocks, con

taining less than 100 returns, were occasionally formed, principally in certain higher income classes where receipts were sparse and intermittent, in order to preclude delay in processing until full blocks were accumulated. "Short" blocks were also employed for rare and terminal series where insufficient returns existed to permit the formation of complete blocks. After completion of the necessary assessment, refunding, or listing operations, the Form 1040 returns were available for sampling.

As returns, Form 1040A, were received, they were subjected to tax determination. They were then assigned serial numbers and blocked in units of 100 returns each, separate series of numbers being provided for taxable assessable returns, overpayment returns, taxable even returns, and nontaxable returns with no prepayments. Sixty days after completion of the necessary assessment and billing operations, the taxable assessable returns were available for sampling; the overpayment and even returns were available for sampling after completion of the necessary refunding and listing operations.

The selection of the 1 percent sample of returns for each of the seven strata encompassed by returns, Form 1040A, and collector returns, Form 1040, was accomplished in the various collectors' offices. To

sample selection operation was prescribed in terms of blocks, one block out of each hundred being required. Collectors' offices were instructed to withdraw for sample purposes all blocks with block number ending in "50" (representing the fifty-first of each successive 100 blocks) from among the various categories of returns, Form 1040A, and collector returns, Form 1040. Although selection of the above blocks represents a departure from a true 1 percent formula, nevertheless in most cases a substantial number of blocks were involved, and the sample approximated closely 1 percent. Furthermore, universes were determined independently and data tabulated from the sample were weighted accordingly.

Prior to 1948 all agent returns, Form 1040, were transmitted to Washington and the selection of the statistical sample of such returns was accomplished in the Statistics Division. For 1948, however, agent returns were retained in collectors' offices where selection of the sample of such returns was accomplished. Also for 1948, separate classifications for blocking purposes were provided for agent returns with adjusted gross income under $25,000 and for agent returns with adjusted gross income $25,000 or more, so that it was feasible for collectors to apply different sampling rates in the "Under $25,000" and "$25,000 or more" income areas. Specifically, collectors' offices were instructed to withdraw all blocks with block number ending in "0" and "5" from among the various categories of agent returns with adjusted gross income under $25,000, and all blocks of returns with adjusted gross income of $25,000 or more. The blocks with block number ending in "0" and "5" approximated a 20 percent sample. In the case of returns with adjusted gross income under $10,000, subsampling to achieve an approximate 10 percent sample was effected in Washington by discarding the "Under $10,000" components of blocks with block number ending "5." The retained "Under $10,000" components of blocks with block number ending in "0" approximated a 10 percent sample; the $10,000 to $25,000 components of blocks with block number ending in "0" and "5" approximated a 20 percent sample.

To the extent that there exists homogeneity within blocks, the efficiency of the sample selected by block sampling procedures is lessened. The degrees of variability shown on page 50 take into account intrablock correlation.

UNIVERSE SIZES

The primary sources of universe data for 1948 were statements. submitted by the 64 collectors' offices showing the number of Form 1040A and collector Form 1040 returns falling into each of the categories (1) through (7), and the number of agent Form 1040 returns falling into groups (8) and (11) combined, (9) and (12) combined, and (10) and (13) combined. One hundred percent representation in the sample was prescribed for agent returns with adjusted gross income $25,000 and over, classified in groups (11), (12), and (13); the numbers of such returns received were subtracted from the combined counts of agent returns with adjusted gross income under $25,000 and with adjusted gross income $25,000 or more for each district to derive the universes with respect to groups (8), (9), and (10). These derived

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