Question

Charles and Joan Thompson file a joint return. In 2017, they had taxable income of $92,370 and paid tax of $14,571. Charles is an advertising executive, and Joan is a college professor. During the fall 2018 semester, Joan is planning to take a leave of absence without pay. The Thompsons expect their taxable income to drop to $70,000 in 2018. They expect their 2018 tax liability will be $8,022, which will be the approximate amount of their withholding. Joan anticipates that she will work on academic research during the fall semester.

During September, Joan decides to perform consulting services for some local businesses. Charles and Joan had not anticipated this development. Joan is paid a total of $35,000 during October, November, and December for her work. Use the appropriate Tax Rate Schedules.

a. What estimated tax payments are Charles and Joan required to make, if any, for tax year 2018? (Round your final answer to 2 decimal places.)

Answer 1

Charles and Joan Thompson file a joint return which helps them in paying lesser tax than they would have paid individually.

The 2018 Income Tax Brackets for the US are as shown below:

Rate	Individuals	Married Filing Jointly
10%	Up to $9,525	Up to $19,050
12%	$9,526 to $38,700	$19,051 to $77,400
22%	38,701 to $82,500	$77,401 to $165,000
24%	$82,501 to $157,500	$165,001 to $315,000
32%	$157,501 to $200,000	$315,001 to $400,000
35%	$200,001 to $500,000	$400,001 to $600,000
37%	over $500,000	over $600,000

Source: https://www.forbes.com/

The table below illustrates the 2017 Tax Brackets

    Source: https://web.blockadvisors.com/

We know from the question that Charles and Joan Thompson had a Taxable income of $92,370

Hence the tax they were supposed to pay is: $10,452.50 + 25% of $16,470 = $14570

They have paid the full dues for 2017

For the year 2018, the total taxable income for the family is $105,000

Hence the tax that has to paid = 22% of $105,000 = $23,100