Kate, an unmarried taxpayer with incomeexclusively from wages, filed her initial income taxreturn for Year 8. By December 31, Year 8, Kate'semployer had withheld $16,000 in federal incometaxes and Kate had made no estimated taxpayments. On April 15, Year 9, Kate timely filed anextension request to file her individual tax returnand paid $300 of additional taxes. Kate's Year 8income tax liability was $16,500 when she timelyfiled her return on April 30, Year 9, and paid theremaining income tax liability balance.What amount would be subject to the penalty forthe underpayment of estimated taxes?

Tax liability is determined based on applicable tax rates and taxable income. There are different…

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What amount would be subject to the penalty for the underpayment of estimated taxes?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Kate, an unmarried taxpayer with income
exclusively from wages, filed her initial income tax
return for Year 8. By December 31, Year 8, Kate's
employer had withheld $16,000 in federal income
taxes and Kate had made no estimated tax
payments. On April 15, Year 9, Kate timely filed an
extension request to file her individual tax return
and paid $300 of additional taxes. Kate's Year 8
income tax liability was $16,500 when she timely
filed her return on April 30, Year 9, and paid the
remaining income tax liability balance.
What amount would be subject to the penalty for
the underpayment of estimated taxes?

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