Amelida expects to earn $145,000 of AGI and $125,000 of taxable income this year.She is concerned about underpayment penalties.Because of a substantial bonus,her prior year AGI was $155,000 and her taxable income was $135,000.She will not be subject to underpayment penalties for the current year if her estimated taxes equal or exceed any of the following criteria except

Question

Quizplus · Accepted Answer

According to the safe harbor rule, the taxpayer will not be subject to underpayment penalties if their estimated tax payments for the current year equal or exceed any of the following criteria:
A) 90% of the tax due for the current year
B) 100% of the tax due for the prior year (110% if the taxpayer's AGI is over $150,000)
D) The estimated tax is less than $1,000
Since choice C requires the estimated payments to be at least 110% of the tax due for the prior year, it is not a safe harbor option for Amelida since her current year AGI is lower than the prior year. Therefore, the best choice is A, B, or D.

Amelida Expects to Earn $145,000 of AGI and $125,000 of Taxable