A taxpayer with an AGI of $300,000 for 2016 pays estimated taxes.The taxpayer can avoid an underpayment penalty by paying:

Question

Quizplus · Accepted Answer

To avoid an underpayment penalty for estimated taxes, taxpayers are generally required to pay at least 90% of their current year's tax liability, or 100% of the prior year's tax liability (110% for high-income taxpayers). In this case, the taxpayer's AGI for 2016 is $300,000, which puts them above the $200,000 threshold for the higher 110% requirement. However, the question only asks what is required to avoid a penalty, not necessarily what is the most beneficial for the taxpayer. Therefore, the correct answer is D, which specifies that the taxpayer must pay at least 90% of their 2016 tax liability ratably over four quarterly payments.

A Taxpayer with an AGI of $300,000 for 2016 Pays