Intuit Academy Tax Practice Exam

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Prepare for the Intuit Academy Tax Exam with targeted quizzes. Utilize flashcards, detailed explanations, and practice multiple choice questions to ensure success and confidence on test day!

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What is the minimum percentage of the prior year’s tax liability that estimated payments must equal for Andrew?

100%
90%
110%
95%

The correct answer is: 110%

For individuals like Andrew, the requirement for estimated tax payments typically involves ensuring that these payments cover a minimum percentage of the previous year’s tax liability to avoid penalties. If the adjusted gross income (AGI) for the prior year was less than $150,000 (or less than $75,000 for married filing separately), Andrew is generally required to pay at least 100% of his prior year’s tax liability. However, if his AGI exceeds these thresholds, it can then shift to needing to cover 110% of the prior year's liability to avoid underpayment penalties. This increased percentage for higher-income earners serves as a way to ensure that those who may have a larger tax obligation are more adequately prepaying their taxes based on the larger amounts from the previous year. That is why the correct answer is that the minimum percentage of the prior year’s tax liability that estimated payments must equal, for higher-income individuals like Andrew, is 110%.