Final answer:
Hassan and Jan should pay at least $1,750 for their first quarter estimated tax payment for 2022. This accounts for the overpayment applied from the previous year's tax, ensuring they meet the minimum required payment to avoid a penalty.
Step-by-step explanation:
The student is trying to determine the minimum amount that should be paid for their 2022 first quarter estimated tax payment given their tax liability and withholdings. The scenario provided informs us that Hassan and Jan expect a tax liability of $20,000 for 2022, had federal income tax withholding of $4,000 in 2021, expect the same amount in 2022, and applied an overpayment of $500 from 2021 to the 2022 first quarter estimated taxes. Their total tax liability was $9,000 in 2021.
For quarterly estimated tax payments, the Internal Revenue Service (IRS) often requires you to pay at least 90% of your current year tax or 100% of your prior year tax, whichever is smaller, to avoid a penalty. Since Hassan and Jan's total tax liability for 2021 was $9,000, splitting that evenly across four quarters would mean each quarter's payment should be at least $2,250 ($9,000 divided by 4). However, because they have an overpayment of $500 that is applied to the first quarter, they can subtract this from the $2,250, resulting in a minimum first quarter payment of $1,750.