Question

In 2016, Bartley Corporation’s federal income tax due was $147,000. Compute the required installment payments of 2017 tax in each of the following cases:

§Bartley’s 2017 taxable income is $440,000.

§Bartley’s 2017 taxable income is $975,000.

§Bartley’s 2017 taxable income is $2,100,000.

Please don't use excel!

Answer 1

Individual income tax returns for residents are generally due on or before the 15th day of the fourth month following the close of the taxable year (April 15 in the case of a calendar-year taxpayer, which is the required year for nearly all taxpayers). The time for filing can be automatically extended for six months by filing Internal Revenue Service (IRS) Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. However, the time for payment of tax cannot be extended.

A non-resident who has compensation subject to withholding must file his or her income tax return on or before April 15. In the case of a non-resident who does not have compensation subject to income tax withholding, the tax return is due on June 15.

Non-residents generally must file income tax returns on time to be permitted to claim deductions. In addition, non-residents who claim the benefits of treaty provisions, or otherwise modify an internal revenue law of the United States, may be required to disclose this position on the tax return for the tax year. A failure to disclose could lead to substantial penalties, including possible disallowance of the treaty benefit claimed.

Generally, the tax shown on an income tax return must be paid at the time fixed for filing the return, determined without regard to any extension of time for filing the return. The tax is self-assessed and is due without government assessment or notice and demand.

Residents

Withholding

Individuals pay tax either through withholding or by making payments of estimated tax. Residents are subject to withholding of income tax on wages paid by their employer. Wages include cash and non-cash payments for services performed by an employee for his or her employer, unless an exception applies.

Estimated tax payments

A taxpayer must pay a certain amount of tax during the current year to avoid penalties for under-payment, so should make estimated installment tax payments if it is expected that tax withholding will be insufficient to satisfy his tax liability. However, an individual is exempted from estimated tax payment requirements if the tax for the current year, after credit for withholding tax, is less than USD 1,000.

See Calculation of Estimates/Pre-payments/Withholding below for further discussion of estimated tax payments.

Non-residents

Withholding

Non-residents are subject to withholding of income tax on wages paid by their employer for services performed in the United States (i.e., income effectively connected with a U.S. trade or business).

A non-resident may also be subject to withholding on U.S . source income that is not effectively connected with a U.S. trade or business (generally, investment income). The withholding rate is 30 percent imposed on gross income, unless lowered by treaty.

Estimated tax payments

A non-resident who earns income that is effectively connected with a U.S. trade or business (other than personal service income, e.g., wages) is subject to the same estimated tax payment requirements as residents.

For non-resident taxpayers, the estimated payment schedule is the same as for residents. See Calculation of Estimates/Pre-payments/Withholding below for further discussion of estimated tax payments.

Tax rates
What are the current personal income tax rates in the United States?
Residents
There are four types of tax status that may apply to a resident:
married filing jointly
married filing separately
head of household
single.
Each filing status is subject to a different graduated tax rate scale. The tax rates for 2018 are shown in the tables on the next page. A couple will be considered to be married for U.S. federal tax purposes if they were legally married in a jurisdiction that recognizes their union and that marriage is recognized by at least one U.S. state, territory or possession, regardless of the couple’s domicile.
Income tax tables for 2018
Income Tax Tables for 2018
Taxable Income Bracket Filing Status Tax Rate
From USD
To USD
Percent
Married filing jointly
0 19,050 10
19,051 77,400 12
77,401 165,000 22
165,001 315,000 24
315,001 400,000 32
400,001
600,000 35
600,001 No limit 37
Married filing separately
0 9,525 10
9,526 38,700 12
38,701 82,500 22
82,501 157,500 24
157,501 200,000 32
200,001
300,000 35
300,001 No limit 37
Head of household
0 13,600 10
13,601 51,800 12
51,801 82,500 22
82,501 157,500 24
157,501 200,000 32
200,001
500,000 35
500,001 No limit 37
Single
0 9,325 10
9,526 37,950 12
38,701 91,900 22
82,501 191,650 24
157,501 416,700 32
200,001
418,400 35
500,001 No limit 37

Filing Status Single Married Filing Jointly Married Filing Separately Head of Household
0% if taxable income is less than $38,600 $77,200 $38,600 $51,700
15% if taxable income is less than $425,800 $479,000 $239,500 $452,400
20%if taxable income is over the above amount
It is generally more beneficial for married taxpayers to file using the status ”married filing jointly” versus ”married filing separately.” However, married individuals wishing to file a joint tax return generally may not do so if either spouse is a nonresident at any time during the tax year. Certain elections may be available to allow a married couple to use the married filing jointly status when one or both of the individuals is a nonresident during part of the year.
A taxpayer may also be subject to an alternative minimum tax. The alternative minimum tax is payable to the extent it exceeds an individual’s regular tax liability. The alternative minimum tax is figured using lower rates, but allows fewer deductions.
Non-residents
A non-resident is subject to tax at graduated rates for income that is effectively connected with a U.S. trade or business, such as compensation for services rendered in the United States. A 30 percent flat tax (or lower treaty rate) applies to U.S . source income that is not effectively connected to a U.S. trade or business, such as U.S . source dividend income, certain interest, and royalties income.
In most cases, nonresidents must file their U.S. income tax return using single or married filing separately status.
Residence rules
For the purposes of taxation, how is an individual defined as a resident of the United States?
As a general rule, a foreign citizen is treated as a non-resident for U.S. tax purposes unless the individual qualifies as a resident. Under US domestic law, a resident is defined as an individual who either is a lawful permanent resident (the “greencard” test), or meets the “substantial presence” test.
A lawful permanent resident is an individual who has been officially granted the right to reside permanently in the United States. These individuals are often referred to as greencard holders.
An individual who meets the substantial presence test is an individual who has been present in the United States for at least 31 days in the current calendar year and an aggregate of 183 days during the current and two preceding years, counting all the days of physical presence in the current year, one-third of the days in the first preceding year, and one-sixth of the days in the second preceding year. In general, a partial day of presence in the