[Tawilkins]

While working a MCQ using Becker, I noticed that there is a discrepancy (or maybe it’s just something I’ve overlooked in the book) as it relates to a non-large corporation’s underpayment penalty. The book, pg. R3-27, says the underpayment penalty will be assessed if the underpayment is >500 and that the non-large corp is required to pay, throughout the year, 100% of tax shown for current year or 100% of tax shown for previous year. However, the MCQ answer states that as long as the corp paid 90% of the tax due by the due date, and the amount owed was not greater than 500, then there would be no penalty due.

I’m confused. Do they have to pay 100% or at least 90%?

AUD - Done
BEC - Done
FAR - Done
REG - Oct.

[OnMyWay732]

I remember seeing this…I am pretty sure the 90% is correct…luckily this didn't come up on the exam but throughout all other parts the requirement is 90% so I just assumed the book had an error and MCQ was correct.

AUD - July 2014 - 76
REG - August 2014 - 82
FAR - November 2014 - 78
BEC - January 2015 - 81

DONE!!!!

Used Becker online. Who needs a text when you can burn your eyes out staring at the screen for months on end?

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you're hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done!"

[rzrbkfaith]

@Tawilkins – for corporations, there is no 90% rule for estimated payments. Be careful because there are several different types of penalties. There is an estimated payment penalty, a late payment penalty (this is where the 90% kicks in) and then there is a late filing penalty.

AUD - 99
BEC - 97
REG - 91
FAR - 1/8/16

[Anonymous]

Be careful. 90% rate only apply to individual on the current total tax, 100% on the prior year total tax (110% in case that the AGI is more than $150,000).

For companies, if more than $500 in tax liability is expected, we should use the 100% of current or prior year (exception: If the company had more than $1M in revenue of prior year, the calculation will be based on first estimated payment based on previous year and the remainder base on the current year).

This is very tricky. I had the same question before until I read the chapter again.

[Author]

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