This year, Paula and Simon (married filing jointly) estimate that their tax liability will be $200,000. Last year, their total t
ax liability was $170,000. They estimate that their tax withholding from their employers will be $175,000. a. Are Paula and Simon required to increase their withholdings or make estimated tax payments this year to avoid the underpayment penalty? Yes No b. By how much, if any, must Paula and Simon increase their withholding and/or estimated tax payments for the year to avoid underpayment penalties?
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Answer:
Note: <em>The complete question is attached as picture below</em>
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We are add the previous month +10% to get that month's amounts
Sales Budget
January February March
Cash sales $50,000 <u>$55,000</u> <u>$60,500</u>
Credit sales $120,000 <u>$132,000</u> <u>$145,200</u>
Total sales $170,000 <u>$187,000</u> <u>$205,700</u>
<u>Workings</u>:
February
Cash sales = 50,000+(50,000*10%) = $55,000
Credit sales= 120,000+(120,000*10%) = $132,000
March
Cash sales = 55,000+(55,000*10%) = $60,500
Credit sales= 132,000+(132,000*10%) = $145,200
