Calculating NB Incorporated's 2021 Tax Installment Payments
Overview
- a. NB's 2021 taxable income is $593,000.
- b. NB's 2021 taxable income is $950,000.
- c. NB's 2021 taxable income is $1,400,000.
Calculations
Amount a. Total installment payments- Total installment payments: The 2021 taxable income ($593,000) would be subject to a federal tax rate of 24%, and the total installment payment due would be $142,032 ($593,000 x 24%).
- Total installment payments: The 2021 taxable income ($950,000) would be subject to a federal tax rate of 35%, and the total installment payment due would be $332,500 ($950,000 x 35%).
- Total installment payments: The 2021 taxable income ($1,400,000) would be subject to a federal tax rate of 37%, and the total installment payment due would be $518,000 ($1,400,000 x 37%).
Explanation
The installment payments are based on the applicable federal income tax rate for the current year. The federal income tax rate is determined by the taxpayer’s taxable income for the year and the applicable tax brackets. The taxpayer’s taxable income is determined by subtracting any deductions and credits from the taxpayer’s total income for the year. The installment payments are due quarterly and are based on the taxpayer’s estimated tax liability for the year. If the taxpayer’s estimated tax liability exceeds their total income tax liability, they will be required to make additional payments in order to avoid any penalties.What factors determine the installment payments for federal taxes?
The installment payments for federal taxes are determined by the taxpayer's taxable income, applicable tax rate, deductions, credits, and estimated tax liability for the year. These factors influence the total amount of installment payments required to be made.