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5. This year Lloyd, a single taxpayer, estimates that his tax liability will be $11,950. Last...

5. This year Lloyd, a single taxpayer, estimates that his tax liability will be $11,950. Last year, his total tax liability was $16,300.

He estimates that his tax withholding from his employer will be $9,035.

a. How much does Lloyd need to increase his withholding by (for the year), in order to avoid the underpayment penalty?

Increase in withholding: _____?___

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Answer #1
Estimated Tax Liability 11950
Total Tax Liability PY 16300
Withholding Taxes 9035
Underpayment Penalty will be levied if:
A (Estimated Tax Liability-Withholding Taxes-Refundable Credit)>1000
B 90% of Current Year Tax Liability
C 100% of Last year returned Tax Liablity
A (11950-9035-0) 2915
B 90% of 11950 10755
C 100% of 16300 16300
In order to have nil tax underpayment liability; (11950-1000)
Withholding Taxes should be 10950
Withholding Taxes Actual 9035
Payment required to be made to avoid tax liability 1915
Increase in Withholding Tax Liability 1915
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