kold services corporation estimates that its 2012 taxable income will be $500,00
ID: 2351440 • Letter: K
Question
kold services corporation estimates that its 2012 taxable income will be $500,000. Thus, it is subject to a flat 34% income tax rate and inurs a $170,000 liability. for each of the following independent cases, compute kold's minimum quarterly estimated tax payments that will avoid an underpayment penalty. a for 2011, taxable income was ($200,000). Kold carried back all of this loss to prior years and exhausted the entire net operating lossin creating a zero 2011 liability. b. for 2011, taxble income was 450,000, and tax liability ws $153,000 for 2010 taxable income was $2million and tax liability was $680,000 for 2011 taxable income was $400,000 and tax liability was $136,000Explanation / Answer
taxable income=$5000000
income tax rate=34%
so tax will=500000*.34=$177000
minimum quarterly estimated tax payments =1777000/4
=$425000
so you pay $425000 per quarter so that there is no underpayment penalty.
for good understanding i give an exemple
Example: You made estimated tax payments of $4,000 per quarter, thinking that $16,000 would be enough to cover 90% of your tax liability in a year when the prior year safe harbor wasn't available. It turned out that $18,000 was required to cover 90% of your tax liability, so you should have paid an additional $500 per quarter. The amount of your underpayment is $500 for the period from April 15 to June 15, $1,000 from June 15 to September 15, $1,500 until January 15, and $2,000 until April 15 when you filed your return with your payment. The underpayment penalty at the 8% rate in this situation would be roughly $107.
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