Asked by Justin Brady on May 26, 2024
Verified
Claude works as a teacher during the year at the local high school.He also prepares taxes on a part-time basis.During 2017,Claude earned $84,800 from his job as a teacher.He also earned $12,000 preparing taxes from January to April 2017.He operates his tax preparation business as a sole proprietorship.Claude estimates that he will owe $2,036 more in income taxes for 2017.Explain what Claude should do so that he does not incur any underpayment penalties.
Underpayment Penalties
Penalties charged by tax authorities for paying less tax than is owed, often calculated based on the amount of underpayment and the time period it spans.
Sole Proprietorship
A type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity.
Income Taxes
Taxes levied by governments on the income earned by entities (individuals or corporations), with rates varying by income level.
- Comprehend how to avoid underpayment penalties for personal income tax.
Verified Answer
NE
Naxish EhtashamMay 30, 2024
Final Answer :
Claude should file the Form 1040-ES and use the coupon for the June 15th payment in the amount of $2,036.Taxes are due and should be paid when additional amounts are earned.In this case,the earnings were generated from January to April,so the taxes are to be paid on June 15.As an alternative,Claude could increase his withholding from his teaching job and avoid paying estimated taxes altogether.
Learning Objectives
- Comprehend how to avoid underpayment penalties for personal income tax.