Assume it is 4/15/21. Your friend, Bob, recently lost his corporate job. He got a job at McDonald’s. He also started his own business which has done quite well. He has continued to work at the local McDonald’s because he enjoys it. Bob knew he needed to make estimated tax payments for his business, in addition to the withholding on his McDonald’s pay. He made the following federal tax payments:

4/15/20 $1,000

6/16/20 500

9/15/20 500

1/15/21 5,000

Bob fears he is going to owe underpayment penalties. He has asked you to compute the amount of the underpayment (not the actual penalty) for him. Bob provides the following, relevant information:

2019 income taxes paid $15,000

2020 income taxes calculated 17,500

Total income tax withholding 5,000

Compute the underpayment amount for EACH quarter and the period upon which the penalty will be computed. Note: Bob’s AGI is $98,000. ALSO find and print the IRC section that describes the overpayment and underpayment penalty interest rates.

Answer rating: 100% (QA)

Bob needs to make an advance payment of taxes on a quarterly basis on 15th April 15th July 15th Oct ... View the full answer