Question

In 2019, NB Inc.’s federal taxable income was $246,000. Compute the required installment payments of 2020 tax in each of the following cases:

Required:

1. NB’s 2020 taxable income is $556,000.
2. NB’s 2020 taxable income is $837,000.
3. NB’s 2020 taxable income is $1,390,000.
   

Answer 1

According to the rules of Federal tax, a person has to pay tax in advance every quarter if his net tax liability after credits and withholding exceeds 10 percent of his total tax liability and is greater than $1,000. Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed

installment payments of NB inc

	case 1	case 2	case 3
Taxable income	5,56,000	8,37,000	13,90,000
Tax calculated as per 2020 federal income tax brackets	156235+ (556000-518400*37%)	156235+(837000-518400*37%)	156235+(1390000-518400*37%)
TAX liability	1,70,147	2,74,117	4,78,727
installment per quarter	tax liability/4	tax liability/4	tax liability/4
1st installment	42,537	68,529	1,19,682
2nd installment	42,537	68,529	1,19,682
3rd installment	42,537	68,529	1,19,682
4th installment	42,537	68,529	1,19,682
Total installments	1,70,147	2,74,117	4,78,727

tax brackets in 2020

Tax rate	Taxable income bracket	Tax owed
0.1	$0 to $9,875	10% of taxable income
0.12	$9,876 to $40,125	$987.50 plus 12% of the amount over $9,875
0.22	$40,126 to $85,525	$4,617.50 plus 22% of the amount over $40,125
0.24	$85,526 to $163,300	$14,605.50 plus 24% of the amount over $85,525
0.32	$163,301 to $207,350	$33,271.50 plus 32% of the amount over $163,300
0.35	$207,351 to $518,400	$47,367.50 plus 35% of the amount over $207,350
0.37	$518,401 or more	$156,235 plus 37% of the amount over $518,400