Category: Writing

Mike Webb, married co Nancy Webb, is employed by a large
pharmaceutical company and earns a salary. In addition, Mike is an entrepreneur
and has nvo small businesses on the side, both of which operate as sole
proprietorships. One is a profitable consulting business where Mike provides
financia l and retirement advice to pharmacists . The other involves the
manufacture of Christmas novelties in China, selling the products in gift shops
in the U.S. This business is struggling . However, Mike feels the Christmas
novelty business has great potentia l. Mike reports the following for 2019:
The Webbs have two dependent children, ages 13 and 11,
and pay child care expenses of $4,000 per year for each          
$21,000
14,000
child. Nancy is nor employed, bur is a full-rime student
(all of 2019 ) at State University, majoring in Accounting
. Federal income tax withhe ld from salary Estimated
taxes paid for 2019
For 2018, Mike and Nancy’s AGI was $175,000 and their actual
federal income tax liability was $29,000. a. Compute the Webbs regular federal
income tax liability for 2019, including selfemployment taxes.
b. Are the Webbs subject to AMT in 2019, assuming they have
additional AMT preferences of $70,000? c. Are the Webbs due a refund for 2019?
d. Are the Webbs subject to any underpayment penalties for
2019?

Estimated Tax Underpayment Penalty. Jane’s estimated tax
payments for the current year total $14,000, and federal income taxes withheld
from her salary amount to $12,000. Jane’s actual tax liability for the current
year is $30,000. Her income was earned evenly throughout the current year.
Jane’s AGI for the prior year was $160,000 and her tax liability was $25,000.
ls Jane subject to the underpayment penalty? Explain.