Question

This year, Paula and Simon (married filing jointly) estimate that their tax liability will be $222,500. Last year, their total tax liability was $185,000. They estimate that their tax withholding from their employers will be $192,250.

a. Are Paula and Simon required to increase their withholdings or make estimated tax payments this year to avoid the underpayment penalty?

    

multiple choice

• Yes

• No

b. By how much, if any, must Paula and Simon increase their withholding and/or estimated tax payments for the year to avoid underpayment penalties?

    

increase in witholding =

Answer 1

sol: Tax withholding is an income tax paid by the payee for the income earned from bonus, commission, other schemes etc. Higher income from such sources lead to more withholding tax. Reducing the income from such sources can only lead to reduction in withholding tax but that not will be the sound decision.

investing income to tax benefit scheme can be the better option instead of redcution in tax liablitity. Also more tax payee person get special status in the country .

So, the answer should be no.

b) increae in withholding ta can be calculated by simply finding the difference between Estimated tax liabilty and the Employer's witholding.

I|ncrease in withholding= 222500- 192250=$30250