Happy,Sleepy,Grumpy,and Doc all did not make adequate estimated payments.Which of them will not owe underpayment penalties for 2017 given the following information?

Question

Quizplus · Accepted Answer

The only way to avoid underpayment penalties is to meet one of the safe harbor rules, which includes paying at least 90% of your current year tax liability or 100% of your prior year tax liability (or 110% if your adjusted gross income is above a certain amount). Since Happy, Sleepy, and Grumpy did not make adequate estimated payments, we can assume they did not meet the safe harbor rule of paying at least 90% of their current year tax liability. However, Doc may have met the safe harbor rule by paying at least 100% of his prior year tax liability. It's impossible to know for sure without more information about their tax situations. Therefore, the only certain answer is E, as it includes the possibility that both Grumpy and Doc may not owe underpayment penalties.

Happy,Sleepy,Grumpy,and Doc All Did Not Make Adequate Estimated Payments