Jeff's Tax Liability for Last Year Was $30,000

question 96

Essay

Jeff's tax liability for last year was $30,000. Jeff projects that his tax for this year will be only $25,000. Jeff is self-employed and, thus, will have no withholding. His AGI for last year did not exceed $150,000. How much estimated tax, at a minimum, should Jeff pay for this year to avoid the penalty for underpayment of estimated taxes? How would your answer change if his income exceeded last year's due to a large capital gain at the end of the year?

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Definitions:

Quick Ratio

Quick Ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets.

Current Assets

Assets that will be used or turned into cash within one year.

Current Ratio

A financial metric that measures a company's ability to pay its short-term obligations with its short-term assets, calculated by dividing current assets by current liabilities.

Debt-to-Equity

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity, indicating the relative proportion of shareholder equity and debt used to finance the company's assets.