Question

Problem 26-31 (Algorithmic) (LO. 6)

Trudy's AGI last year was $382,000. Her Federal income tax came to $114,600, which she paid through a combination of withholding and estimated payments. This year, her AGI will be $573,000, with a projected tax liability of $85,950, all to be paid through estimates.

Note: Ignore the annualized income method.

Do not round any division. Round each quarterly payment to the nearest whole dollar value.

a. Trudy's total estimated tax payments are $ __________ under the current-year method and $_____________under the prior-year method.

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b. Assume instead that Trudy's AGI last year was $130,000 and resulted in a Federal income tax of $26,000. Her total estimated tax payments are $ _____________under the current-year method and $______________under the prior-year method.

Answer 1

Ans:

a. Trudy's total estimated tax payments are $ ________under the current-year method and $_________ under the prior-year method.

Current Year Method
Tax Estimated	$85,950
Percentage payable	90%
Tax Payment	$77,355
Prior Year Method
Tax Paid	$114,600
Percentage payable	110%
Tax Payment	$126,060

b. Assume instead that Trudy's AGI last year was $130,000 and resulted in a Federal income tax of $26,000. Her total estimated tax payments are $ ________under the current-year method and $__________ under the prior-year method.

Current Year Method
Tax Estimated	$85,950
Percentage payable	90%
Tax Payment	$77,355
Prior Year Method
Tax Paid	$26,000
Percentage payable	100%
Tax Payment	$26,000

Note:

If prior year Adjusted Gross Income was $150,000 or less, then avoid a penalty if pay either 90 percent of this year's income tax liability or 100 percent of your income tax liability from last year