A taxpayer with an AGI of $300,000 for 2017 pays estimated taxes.The taxpayer can avoid an underpayment penalty by paying:

Question

Quizplus · Accepted Answer

According to the IRS, taxpayers can avoid underpayment penalties by paying at least 90% of their current year's tax liability, or 100% of their previous year's tax liability (110% if their AGI exceeds $150,000). Option B states that the taxpayer must pay at least 90% of their 2017 tax liability ratably over four quarterly payments, which satisfies the IRS requirement for avoiding underpayment penalties. Option A is incorrect because the taxpayer's 2016 AGI is not a factor in the calculation. Option C is also incorrect because it requires the taxpayer to pay 100% of their 2017 tax liability, which may not be possible or necessary. Option D is incorrect because it requires the taxpayer to pay 110% of their 2017 tax liability, which is only necessary if their AGI exceeds $150,000.

A Taxpayer with an AGI of $300,000 for 2017 Pays