Question

11) Emma had a tax liability in 20x1 of $18,000, which she paid. For 20x2, she calculates a tax liability of $30,095. What is the minimum amount of tax payments that Emma needs to make for 20x2 on a timely basis in order to avoid any under withholding penalty? (Her AGI was less than $150,000 in the preceding year.)

Answer 1

To avoid the under withholding penalty, one should abide by the rules, which are
(i) to owe less than $1000 in tax after subtracting their withhold and refundable credits.
(ii) if paid at least 90% of the withholding and estimated tax of the tax of the current year.
(iii) 100% of the tax shown on the return of the prior year.

Under these conditions, the minimum amount that have to be paid be Emma is
Conditions
(i) 30095-1000 = $29095
(ii) 30095*90% = $ 27086
(iii) $18000
Least of the above three should be considered, which is $ 27086.

So, the minimum amount should be paid by Emma to avoid any under withholding penalty is $27086