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Tammi has year 20X1 tax liability of $42,000. she estimates that 20X2 tax liability will be...

Tammi has year 20X1 tax liability of $42,000. she estimates that 20X2 tax liability will be $48,000. Year 20X1 AGI was $165,000. Year 20X2 withholdings from wages will be $26,000. What amount of estimated tax payment must Tom make each quarter and not incur an underpayment penalty for 20X2? a. $ 5,050 b. $ 5,500 c.$ 4,000 e. None is correct.
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Answer #1

Answer:- The correct option is a)$ 5050 .

Working =   1) 100% of previous year tax liability (and for individuals having AGI greater than $150000 than 110%)

in this case AGI is $165000 so we have to take 110% of previous year liablity. = 110% *42,000

= $46,200

2) 90% of current tax liability (48,000*90%)=$43,200

Tom withholding does not equal or exceeds $46,200 or $43,200, so tom has to increase his estimated payment or withholding in the year to avoid penalty.(46,200-26,000)=$20,200 per year or $5,050 per quarter

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