|Posted: 10 Jul 2008 at 21:41 | IP Logged
In this question I am confused about the part of the solution that claims the seasonal method is not permitted. If I understand correctly, the rule is that estimated tax payments can be made via: (1) 90% of current year's tax or (2) 100% of prior year's tax. However, if AGI exceeds $150,000 then #2 is replaced with 110% of prior year's tax.
I'm not exactly sure that I understand the definintion of "seasonal method", which is probably what is confusing me.
Please help me where I am lost. Thanks!!
A CPA's adjusted gross income (AGI) for the preceding 12-month tax year exceeds $150,000. Which of the following methods is (are) available to the CPA to compute the required annual payment of estimated tax for the current year in order to make timely estimated tax payments and avoid the underpayment of estimated tax penalty?
I. The annualization method.
II. The seasonal method.
A. I Only
B. II Only
C. Both I and II
D. Neither I nor II
Choice "a" is correct. In computing the amount of estimated payments due, an individual taxpayer may choose between the annualized method (90% of current year's tax), or the prior year method (100% of last year's tax) unless the taxpayer's adjusted gross income exceeds $150,000 then they must use 110% of last year's tax. Therefore, the taxpayer in this example can use the annualized method. The seasonal method is not permitted.
Choices "b", "c", and "d" are incorrect per the above explanation.