AFTR AFTR Tax Withholding and Estimated Taxes 1 — Questions and Answers
Question 1: An employee who wants to claim exempt from federal income tax withholding must meet which requirement?
- Had no federal income tax liability last year and expects none this year (Correct answer)
- Earned less than $10,000 in the prior year
- Is claimed as a dependent on someone else's return
- Is under age 21
Correct answer: Had no federal income tax liability last year and expects none this year
To claim exempt from withholding on Form W-4, the employee must have had zero federal income tax liability the prior year and expect zero liability in the current year.
Question 2: Which form does an employee complete to tell their employer how much federal income tax to withhold?
- Form W-2
- Form W-4 (Correct answer)
- Form 1099-W
- Form 941
Correct answer: Form W-4
Form W-4, Employee's Withholding Certificate, is submitted to the employer to designate withholding allowances and any additional withholding amounts.
Question 3: When are estimated tax payments generally due for calendar-year individuals?
- January 15, April 15, July 15, October 15
- April 15, June 15, September 15, January 15 (Correct answer)
- March 31, June 30, September 30, December 31
- April 15, July 15, October 15, December 15
Correct answer: April 15, June 15, September 15, January 15
The four estimated tax due dates for calendar-year taxpayers are April 15, June 15, September 15, and January 15 of the following year.
Question 4: Which form is used by individuals to pay estimated federal income taxes?
- Form 1040-ES (Correct answer)
- Form 1040-V
- Form 2210
- Form W-4P
Correct answer: Form 1040-ES
Form 1040-ES, Estimated Tax for Individuals, is used to calculate and pay quarterly estimated taxes.
Question 5: A taxpayer avoids the underpayment penalty if withholding and estimated payments equal at least what percentage of the prior year's tax liability (for taxpayers with AGI ≤ $150,000)?
- 90%
- 100% (Correct answer)
- 110%
- 85%
Correct answer: 100%
One safe harbor is paying 100% of the prior year's tax liability (110% for AGI above $150,000) through withholding and/or estimated payments.
Question 6: Form 2210 is used by taxpayers to:
- Request an extension of time to file
- Calculate the underpayment of estimated tax penalty (Correct answer)
- Report backup withholding credits
- Adjust W-4 withholding retroactively
Correct answer: Calculate the underpayment of estimated tax penalty
Form 2210 is used to determine whether a taxpayer owes a penalty for underpaying estimated taxes and to calculate the penalty amount.
AFTR AFTR Tax Withholding and Estimated Taxes 1
An employee who wants to claim exempt from federal income tax withholding must meet which requirement?