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?

---

Definitions:

Merchandise Inventory

Goods that a retailer, distributor, or manufacturer aims to sell to generate revenue, recorded as a current asset on the balance sheet.

Cash Paid

Cash Paid refers to the actual outflow of cash from a company to settle obligations, such as paying for expenses, acquisitions, or dividends.

Notes Payable

Written agreements where the borrower promises to pay back a specified sum of money plus interest to the lender at a future date.

Cash Flow

The total amount of money being transferred into and out of a business, affecting its liquidity and overall financial health.