This year Lloyd, a single taxpayer, estimates that his tax liability will be $12

ID: 2375501 • Letter: T

Question

This year Lloyd, a single taxpayer, estimates that his tax liability will be $12,000. Last year, his total tax liability was $16,000.

He estimates that his tax withholding from his employer will be $9,020. (Do not round intermediate calculations. Omit the "$" sign in your response.)

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

Assuming Lloyd does not make any additional payments, what is the amount of his underpayment penalty? Assume the federal short-term rate is 5%.

This year Lloyd, a single taxpayer, estimates that his tax liability will be $12,000. Last year, his total tax liability was $16,000.

taxpayers can withhold underpayment penality if they estimated tax payments equals one of the following

1) 90% * 12000 = 10800

2) 100% * 16000 =16000

he doesnt staisfy any one of the above criteria

hence

increase in withholding = 1780

b) penality for first quarter = (2255 - 2700) * 8% * 0.25 = 8.9

penality for second quarter = (4510 - 5400) * 8% * 0.25 = 17.8

penality for third quarter = (6765 - 8100) * 8% * 0.25 = 26.7

penality for fourth quarter = (9020 - 12000) * 8% * 0.25 = 35.6

total penality = 89

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