Question

Scott and Cindy Muir had alternative minimum taxable income of $970,000 in the current year

and file a joint return. For purposes of computing the alternative minimum tax, their exemption is

A. $25,000

B. $55,850

C. $71,700

D. $111,700

A taxpayer does not have to pay estimated taxes if

A. The taxpayer’s tax liability for the previous year was less than $1,000.

B. The taxpayer’s withholding covers 90% of the tax liability for the previous year.

C. The taxpayer’s Earned Income Credit will exceed his or her tax liability for the current year.

D. All of the answers are correct

Her Year 1 tax liability was $12,000 and her Year 2 income tax withholding will be $9,750.

B. Her Year 1 tax liability was $12,000 and her Year 2 income tax withholding will be $9,000.

C. Her Year 1 tax liability was $5,000 and her Year 2 income tax withholding will be $6,000.

D. Her Year 1 tax liability was $9,000 and her Year 2 income tax withholding will be $8,500.

Answer 1

1. AMT exemption for married filing jointly for 2019 is $ 111,700 and 2020 is $ 113,400. Since the problem mentions current year and options doesn't have the limit for 2020, Option D is Correct.

2. A taxpayer will not have to pay estimated taxes if,

• Tax owed is not more than $ 1,000 when the returns are filed.
• Tax payer's withheld tax and other credits are sufficient to cover at least 90% of the tax dues

Thus Option D is Correct.

3.

Tax is payable when the annual estimated tax payment is the lesser of,

• 90% of the tax for the CY (or)
• 100% of the tax for the PY

The tax liability is 90% of income tax for year 2 ie., 10,000*90% = $ 9,000 or tax liability for Year 1 whichever is less. Thus in Option D, Withheld tax is $ 8500 and tax in PY is $ 9,000. Hence less than that limits. Thus Option D is Correct.