Refer to the preceding problem. Assume that Ed expects his income for this year to decline and his tax liability for this year to be only $15,000. What minimum amount of estimated taxes should Ed pay this year? What problem will Ed encounter if he pays this minimum amount and his current year income exceeds last year's because of a large capital gain realized in December of this year?
In preceding problem
Ed's tax liability for last year was $24,000. Ed projects that his tax for this year will be $34,000. Ed is self-employed and, thus, will have no withholding. His AGI for last year did not exceed $150,000. How much estimated tax should Ed pay for this year to avoid the penalty for underpaying estimated taxes?