Harmon, Inc. was incorporated and began business on January 1, 2014. Its tax liability for 2014 was $36,000. Its tax liability for 2015 was $50,000. Which of the following is a correct statement concerning the payment of estimated taxes for 2015?

Question

Quizplus · Accepted Answer

Under the safe harbor rule, corporations must pay at least 100% of their prior year's tax liability (110% if the corporation's taxable income exceeds $1 million) in estimated taxes to avoid penalties. So, Harmon must pay at least $36,000 (100% of the prior year's tax liability) in estimated taxes for 2015.

Option A is incorrect because it suggests that Harmon only needs to pay $50,000 in total tax liability for the year, which is not correct.

Option C is incorrect because Harmon needs to pay the estimated taxes in four installments throughout the year.

Option B is correct because $36,000 (safe harbor amount) divided by four installments is $9,000 per installment, and the remaining balance of $14,000 can be paid by the tax return due date (March 15, 2016).