Question

Charles and Joan Thompson file a joint return. In 2018, they had taxable income of $92,370 and paid tax of $12,202. Charles is an advertising executive, and Joan is a college professor During the fall 2019 semester, Joan is planning to take a leave of absence without pay. The Thompsons expect their taxable income to drop to $70,000 in 2019. They expect their 2019 tax liability will be $8,015, which will be the approximate amount of their withholding Joan anticipates that she will work on academic research during the fall semester During September, Joan decides to perform consulting services for some local businesses Charles and Joan had not anticipated this development. Joan is paid a total of $35,000 during October, November, and December for her work. Use the appropriate Tax Rate Schedules Required: a. What estimated tax payments are Charles and Joan required to make, if any, for tax year 2019? Estimated tax payments required

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Answer 1

Taxable income in 2019 = 70,000 + 35,000 = $105,000 Tax on $105,000 in 2019 = 9,086 + (105,000 - 78,950) *22% = 9,086 +5,731 = $14,817 Estimated tax payments for tax year 2019 are lesser of the following two amounts - (a) 100% of tax shown in 2018 tax return = $12,202 (b) 90% of the tax to be shown in 2019 tax return = 90% of $14,817 = $13,335.3 Estimated tax payments for tax year 2019 = $12,202 (lower of (a) and (b)] But $8,015 will the approximate amount of their tax withholding. Therefore, estimated tax payments for tax year 2019 = 12,202 - 8,015 = $4,187 Estimated tax payments required $4,187