Tax Reseach Probelm - th the second year estimated taxes...

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Tax Research Problem C: 3-71 Law and Analysis: Under the International Revenue Services section.6655 (d)(1), a corporation can prevent a penalty for failure to pay require estimated tax installments under certain conditions. One if the total amount of all estimated tax payments was made on or before the last day arranged for the payment of the installment equals or if the payment exceeds the smaller amount that would have been required if the estimated tax were (1) 100% of the tax shown on the return for the current tax year or the second year (2) 100% of the tax shown on the corporation’s return for the previous tax year. Analysis: According to Rev. Rules. 86-58, 1986-1 C.B. 365 states that additions to tax for underpayment of estimated tax for the year is computed by reference to the corporation’s original return. So if the corporation files an amended return on, or before the due date of the original return including extensions). In this situation of tax for underpayment of Wicker’s April 20
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Unformatted text preview: th the second year estimated taxes are computed by reference to the corporation's original March 12 tax return, which shows a $20,000 liability. The issue here is that because Wicker did not file the amended tax return until April 20 a month after the due date for the return with no extension requested Wicker is relying on Sec. 6655(d)(1) to avoid additions to tax for April 20 th . Whicker must make estimated tax payments based on the tax liability shown on the original return filed on March 12, or an amended return filed by the due date for the original return which should also include the extensions. Therefore, Wicker must base its estimated tax payments for April 20 th on the $20,000 tax liability reported on the original March 12 return if its going to use the prior year exception. Wicker could also rely on having paid 100% of the current tax year liability of April 20 th ....
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