Question

Jake's tax liability for 2017 is $43,000; his 2016 liability was $50,000 He had withholding of...

Jake's tax liability for 2017 is $43,000; his 2016 liability was $50,000 He had withholding of $40,000 for 2017 and his AGI is $150,000. No estimated tax payments were made, and he will pay his tax liability on April 15, 2018. The form 2210 short method penalty calculation is based on 0.02660. What is his estimated tax penalty for the year?

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Answer #1

Answer:

Jake's tax liability for 2017 is = $43,000

His 2016 tax liability was = $50,000

He had withholding of $40,000 for 2017

Tax payer is liable to pay penalty for 2017 if total withholding and timely estimated tax payments does not equal at least the smaller of:

1. 90% of tax payer's 2017 tax liability or

2. 100% of 2016 tax (110% of 2016 tax in case 2016 AGI > $150,000)

Jake's withholding for 2017 as percentage = $40,000 /$43,000 = 93.02%

As such Jake's withholding for 2017 is more than 90% of his 2017 tax liability and he meets condition 1 above and he does not owe any tax penalty.

His estimated tax penalty for the year = $0

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