Jason Marks has to pay his tax by instalments as a result of his significant investment in- come.His net tax owing in 2009 was $13,600.In 2010, it was $15,000.His estimate for 2011 is $17,000.If he decides to pay his 2011 tax instalments according to the prior year option, how much should he pay on September 15, 2011?

Question

Quizplus · Accepted Answer

The prior-year option allows Jason to base his tax instalments for 2011 on the previous year's net tax owing, as long as his income and deductions are similar. Since Jason's net tax owing was $15,000 in 2010, he can use that as the basis for his 2011 instalments.

To calculate the September 15 instalment, he needs to pay one quarter of his estimated 2011 tax owing, which is $17,000.

Thus, the amount Jason should pay on September 15, 2011, is $17,000 x 0.25 = $4,250.

Therefore, the answer is B) $4,250.

Jason Marks Has to Pay His Tax by Instalments as a Result