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Victoria’s 2016 tax return was due on April 15, 2017, but she did not file it until June 12, 2017. Victoria did not file an extension. The tax due on the tax return when filed was $10,300. In 2016, Victoria paid in $17,400 through withholding. Her 2015 tax liability was $15,100. Victoria’s AGI for 2016 is less than $150,000. How much penalty will Victoria have to pay (disregard interest)?
Expert Answer
Withholding paid of $ 17400 + Taxes due $ 10300 = $ 27700 ( total tax for 2016 )
So, there is underpayment of $ 10300
Penalty = 10300 * 15 % ( 3 months * 5 % penalty per month ) = $ 1545
Victoria must have paid the lesser of 90 % of the current year’s tax or 100 % of the prior year’s tax ( 15100 ). Since she paid $ 17400 in withholding, she does not have to pay the underpayment penalty.
