Harmon,Inc.was incorporated and began business on January 1,2016.Its tax liability for 2016 was $36,000.Its tax liability for 2017 was $50,000.Which of the following is a correct statement concerning the payment of estimated taxes for 2017?

Question

Quizplus · Accepted Answer

According to the safe harbor rule for estimated taxes, a taxpayer must pay at least 90% of their current year's tax liability or 100% of their prior year's tax liability (110% if their prior year's adjusted gross income exceeds $150,000) in estimated taxes throughout the year.

Harmon's prior year's tax liability was $36,000, so they must pay at least $36,000 x 90% = $32,400 in estimated taxes for the current year (2017).

Harmon's tax liability for 2017 was $50,000, so they must pay at least $50,000 x 90% = $45,000 in estimated taxes for 2017.

Since Harmon's tax liability for 2016 was less than $45,000, they must pay estimated taxes of at least $9,000 on April 15, June 15, September 15, and December 15, 2017.

The remaining balance of $41,000 ($50,000 - $9,000 x 4) is payable by March 15, 2018.

Therefore, choice B is correct.