For James to avoid an underpayment penalty in 2020, he needs to pay <u>$23,912.50</u>.
<h3>What is an underpayment penalty?</h3>
An underpayment penalty is the IRS fine levied on taxpayers who do not pay enough of their estimated tax liability.
According to the IRS rules, to avoid an underpayment penalty, James must pay either 100% of last year's tax or 90% for 2020.
<h3>Data and Calculations:</h3>
Tax liability from 2019 = $6,700
AGI for the current tax year = $85,000
Taxable income = $76,500 (assumed to be 90% of AGI)
Tax rate = 25%
Tax liability for 2020 = $19,125 ($76,500 x 25%)
Minimum tax to pay to avoid underpayment penalty = $23, 912.50 ($6,700 + $19,125 x 90%)
Thus, for James to avoid an underpayment penalty in 2020, he needs to pay <u>$23,912.50</u>.
Learn more about underpayment penalties at brainly.com/question/14328731
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