Jason Marks has to pay his tax by instalments as a result of his significant investment income. His net tax owing in 2018 was $13,600. In 2019, it was $15,000. His estimate for 2020 is $17,000. If he decides to pay his 2020 tax instalments according to the prior year option, how much should he pay on September 15, 2020?
A)$3,400.
B)$3,750.
C)$4,250.
D)$6,500.

Question

Quizplus · Accepted Answer

According to the prior year option, Jason should pay his tax instalments based on the previous year's net tax owing. Therefore, the amount he should pay on September 15, 2020, is equal to the prior year's net tax owing divided by four (since there are four instalment due dates throughout the year). So, he should pay $15,000/4 = $3,750. Option B is the closest amount to this figure.

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