Question

Question 42 of 100. Millie's 2020 tax liability is $41,293. Her AGI is greater than $150,000. Her 2020 withholding is $36,910. Her 2019 tax liability was $29,570. Does she owe an estimated tax payment penalty for 2020

Answer 1

Millie doesn't owe any type of penalty, she owes taxes but not a penalty. Her 2020 withholdings were $36,910, which is almost 25% higher than her previous tax liability ($29,570).

The IRS can penalize you for not having enough tax withholdings only if you didn't pay at least 90% of your tax liabilities or if your withholdings were less than the tax liability of the previous year (whichever is less). In this case, the withholdings were more than last year's tax liability.