Your client wants to avoid any penalty for underpayment of estimated taxes by making timely deposits.Determine the amount of the minimum quarterly estimated tax payments required to avoid the penalty.Assume your client's adjusted gross income last year was $140,000.

Question

Quizplus · Accepted Answer

To avoid the penalty, the client must pay 90% of this year's tax liability or 100% of last year's tax liability (110% if their AGI was over $150,000). Assuming the client has no other deductions or credits, their tax liability for the current year would be $24,120 ([($140,000 - $12,200) x 0.24] + $1,029). Therefore, they would need to make quarterly estimated tax payments of at least $6,030 ($24,120/4) to avoid the penalty. However, since the answer choices are all rounded to the nearest $100, the correct answer is $7,650, which is the closest to $6,030.

Your Client Wants to Avoid Any Penalty for Underpayment of Estimated