1. Look at the Form 1040A you prepared for Bill Nelson. What is the amount on Form 1040A, Line 47?

A. $ 2,920.
B. $ 1,752.
C. $ 3,500. 
D. $ 2,000.

2. Look at the Form 1040A you prepared for Bill Nelson. What is the amount of refund on Form 1040A line 48?

A. $18.
B. $68.
C. $-0-. 
D. $28.

3. Charles Moore had a $2,000 tax liability in 2008. In 2009, Charles expects to owe at least $1,500 in federal tax. For 2009, he has no withheld income tax. Charles does not need to file estimated tax because his tax in 2009 is less than his 2008 tax.

True False

4. Which statement pertaining to estimated tax payments is not correct?

A. An individual, whose only income is from self-employment, will have to pay estimated payments.
B. If insufficient tax is paid through withholding, estimated payments may be necessary.
C. Estimated tax payments are required when the withholding taxes are greater than the overall tax liability.  
D. Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well.

 5. No estimated tax payments are required if enough tax is paid through withholding to keep the amount owed with the return under $1,000.

True False

6. Violet made no estimated tax payments for 2008 for 2008 because she thought she had enough tax withheld from her wages. In January 2009, she realized that her withholding was $2,000 less than the amount needed to avoid a penalty for the underpayment of estimated tax so she made an estimated tax payment of $2,500 on January 10. Violet filed her 2008 return on March 1, 2009, showing a refund due her of $100. Which of the following statements is NOT true regarding the estimated tax penalty?

A. Violet will not owe a penalty for the quarter ending December 31, 2008, because she made sufficient payment before January 15, 2009.
B. Violet will not owe a penalty for any quarter because her total payments exceed her tax liability.
C. Violet could owe a penalty for one or all of the first 3 quarters even though she is due a refund for the year.  
D. If Violet owes a penalty for any quarter, the underpayment will be computed from the date the amount was due to the date the payment is made.

7. If a taxpayer files his 2008 Form 1040 by January 31, 2009 and pays the balance due with the return, he will not receive an underpayment of estimated tax penalty for the fourth quarter estimated tax payment that was due on January 15, 2009.

True False

8. A taxpayer had adjusted gross of $98,000 and a total tax liability in 2007 of $20,000. In 2008, the taxpayer has a tax liability of $25,000. The taxpayer's withholding was increased to $23,500. He will file his tax return for 2008 on April 10, 2009. To avoid the underpayment of estimated tax penalty, the taxpayer must:

A. Pay the additional $1,500 tax due by April 15, 2009.
B. Pay an additional $1,500 by January 15, 2009.
C. File an annualized estimated tax computation.
D. Do nothing, as he has satisfied the minimum tax payment requirements.

9. If the taxpayer files his 2008 Form 1040/1040A by January 31, 2009, and pays the rest of the tax due, he does NOT need to make the estimated tax payment that would have been due on January 15, 2009.

True False

10. Sue must make estimated tax payments of $4,000 for the tax year. She makes the following payments:

* 1st Payment - Credit of $1,000 from her previous year refund.

* 2nd Payment - $500 on April 20th.

* 3rd Payment - $500 on May 31st.

* 4th Payment - $1,000 on August 15th.

* 5th Payment - $500 on October 15th.

* 6th Payment - $500 on December 30th.

A. She has not made timely payments because her 2nd and 3rd payments were not made by April 15th.
B. She has not made timely payments because her 4th payment was not made by June 15th.
C. She has made timely estimated payments.
D. She has not made made any timely payments because none of the payments were made by the required IRS schedule.

11. Dr. Steve and Joyce are married and have total income of $190,000, itemized deductions of $15,000, and exemptions totaling $5,800, leaving estimated taxable income of $169,200. For 2008, the tax on $169,200 would be $43,960. They have withholding of $36,960 during the year. In 2007, they paid a total of $42,000 in taxes for the year on an adjusted gross income of $185,000. For 2008, they would need to make:

A. No estimated tax payments since they have withholding taxes.
B. Estimated payments of $2,604.
C. Estimated payments of $8,652.
D. Estimated payments of $5,040.

12. A taxpayer has total tax in the previous year of $21,000. In this year, the taxpayer received a bonus and his tax increase $4,500. The taxpayer has long-term capital gains of $4,000 with a tax of $800. The taxpayer's withholding was increased to $23,700. To avoid a penalty for underpayment of estimated tax the taxpayer must:

A. Do nothing, since the withholding exceeds 100% of last year's tax.
B. Pay an additional $5,300 to equal 100% of tax due.
C. Do nothing, since the withholding exceeds 90% of tax due this year.
D. Both A and C are correct.

13. Jennifer expects to owe $1,500 in tax in 2008. Her tax liability for 2007 was $0. Jennifer is not required to pay estimated tax for 2008.

True False

14. Marge Godfrey sold her investment property March 30, 2008 at a gain of $50,000. Marge expects to owe $10,000 in additional income taxes on this sale. She had a tax liability of $900 for 2007 and will have no withholding for 2008. Marge's  first estimated tax payment is due on what date?

A. April 30, 2008.
B. April 15, 2008.
C. January 31, 2009.
D. June 15, 2008.

15. Phoebe Smith, a single taxpayer, expects her adjusted gross income for 2009 to be $75,000 and her tax to be $15,850. Her withholding will be $14,000 and she does not expect to have any credits. The tax on her prior year return was $15,000. Phoebe does not need to make estimated payments.

True False

16. Susan, a single filer, started a home-based dress business on March 1, 2009. She was an employee and paid income taxes of $6,000 for 2008. Susan's business had net income of $0, $9,000, $11,000, and $15,000 respectively for each of the calendar quarters in 2009. Susan's total tax liability for the year was $5,500. Her first payment of estimated taxes in due:

A. April 15.
B. No estimates due if Susan files by January 31, 2010.
C. June 15.
D. Susan's tax liability for 2008 exceeds 90% of her 2009 tax liability so no estimates are required to be paid.

17. The tax shown on Janet's 2008 return was $11,000. Her expected tax liability for 2009 is $12,000. Tax expected to be withheld in 2009 is $10,900. Janet will be subject to the estimated tax penalty if she does not adjust her withholding or make estimated tax payments.

True False

18. You do not have to pay estimated taxes if:

A. Your tax liability for the previous year was less than $1,000.
B. Your withholding covers 90% of the tax liability for the previous year.
C. Your earned income credit will exceed your tax liability for the current year.
D. All of the above.

19. You must estimated tax payments for 2008 if you expect to owe at least $1,000 in tax for 2008, after subtracting your withholding and credits, and you expect your withholding and credits to be less than the smaller of (1) 90% of the tax to be shown on your 2009 tax return, or (2) 100% of the tax shown on your 2008 tax return.

True False