Respuesta :
Answer:
When a taxpayer has an underpayment of estimated tax or fall behind on his/her tax prepayment, then he/she is required to pay a penalty on Form 2210. This penalty is called underpayment penalty.
According to the tax laws, Mr. P and Ms. S can avoid an underpayment penalty if their withholding's and estimated tax payments equal or exceed one of the following two safe harbors:
- 90 percent of current tax liability ($200,000 x 90% = $180,000)
- 110 percent of previous year tax liability (110% x $170,000 = $187,000)
From the above calculation, it is clear that Mr. P and Ms. S's withholding's ($175,000) do not equal or exceed the amount of two safe harbors. So, they need to increase their withholding's or make estimated payments to avoid underpayment penalty.
If Mr. P and Ms. S increase their withholding's by $5,000 or make estimated payments of $1,250
per quarter ($5000/4), they can avoid the underpayment penalty.
Mr. Paula and Simon average gross income is greater than $150,000, so 110% is taken.
Answer:
yes they are required to increase their withholding tax by $5000
Explanation:
Paula and Simon will have to increase their withholding or make estimated tax payments to avoid underpayment penalty if the fall inside these two categories
current tax withheld for current year ≤ 90% of the current tax liability or
current tax withheld ≤ 110% of the previous year tax liability
current tax liability = $200000
last year tax liability = $170000
tax withheld = $175000
90% of $200000 = $180000: Is greater than tax withheld ( $175000 )
110% of $170000 = $187000 : Is greater than tax withheld ( $175000 )
To avoid underpayment penalty Paula and Simon should increase their withholding by at least $5000 or make estimated quarterly payments of $1250
