Please provide me with the right solution to this problem. NOTE: this problem wi

Question

Please provide me with the right solution to this problem. NOTE: this problem will be graded. Thank you in advance.

Julie, being self-employed, is required to make estimated payments of her tax liability for the year. Her tax liability for 2015 was $25,000, and her AGI was less than $150,000. For 2016, Julie ultimately determines that her income tax liability is $18,000. During the year, however, she made the following payments, totaling $13,000: April 15, 2016 June 15, 2016 September 15, 2016 January 17, 2017 Total paid $4,500 2,800 4,100 1,600 $13,000 Because Julie prepaid so little of her ultimate income tax liability, she now realizes that she may be subject to the penalty for underpayment of estimated tax. a. Based on this information, Julie's required annual payment for estimated taxes should have been 16,200 , and each quarterly installment would have been 4,050 V

Explanation / Answer

b. Calculation of Estimated Tax as per IRS.

Estimated tax is atleast smaller of one of the below mentioned amounts:

i. 90% of the current year tax liability, or

ii. 110% of the previous year tax liability if AGI in last year was more than $150,000 and 100% of the last year tax liability if AGI last year was less than to $150,000.

90% of the current year tax = 90% x $18,000 = $16,200 or

100% of last year tax liability(Since AGI is less than $150,000) = $25,000

Therefore, estimated tax liability = $16,200 (Being lower of the two)

Estimated Tax liability paid during the year = $13,000

Estimated Underpaid Tax Liability = $16,200 - $13,000 = $3,200

c. Using the same concept as discussed above,

Estimated Tax Liability for 2016 = 90% of $18,000 or 100% of $15,960 whichever is lower

= $15,960

Estimated underpaid taxes = $13,000 - $15,960 = $2,960

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