Problem 9-10 Estimated Payments (LO 9.3)

Sherina Smith (Social Security number 785-23-9873) lives at 536 West Lapham Street, Milwaukee, WI 53204, and is self-employed for 2022. She estimates her 2022 Schedule C net profit will be $50,000, one-half of self-employment tax will be $3,532, and her qualified business income deduction will be $5,414 in 2022. Sherina has no other forms of income or deductions. She has a dependent child aged 15 and files as head of household. Sherina expects to claim the child tax credit in 2022 but no other credits. Calculate her annual required payment based on 2022 estimates using the 2022 Estimated Tax Worksheet. Complete the worksheet through line 12a only.

Click here to access the 2022 Tax Rate Schedules for this problem.

2022 Estimated Tax Worksheet

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1	Adjusted gross income you expect in 2022 (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1	fill in the blank 1
2a	Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2a	fill in the blank 2
	If you plan to itemize deductions, enter the estimated total of your itemized deductions. If you dont plan to itemize deductions, enter your standard deduction.	}
b	If you can take the qualified business income deduction, enter the estimated amount of the deduction	2b	fill in the blank 3
c	Add lines 2a and 2b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2c	fill in the blank 4
3	Subtract line 2c from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3	fill in the blank 5
4	Tax. Figure your tax on the amount on line 3 by using the 2022 Tax Rate Schedules. Caution: If you will have qualified dividends or a net capital gain, or expect to exclude or deduct foreign
	earned income or housing, see Worksheets 2-5 and 2-6 in Pub. 505 to figure the tax. . . . . . . . . . . . . . . . . . .	4	fill in the blank 6
5	Alternative minimum tax from Form 6251 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5	fill in the blank 7
6	Add lines 4 and 5. Add to this amount any other taxes you expect to include in the total on Form 1040
	or 1040-SR, line 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6	fill in the blank 8
7	Credits (see instructions). Do not include any income tax withholding on this line . . . . . . . . . . . . . . . . . . .	7	fill in the blank 9
8	Subtract line 7 from line 6. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8	fill in the blank 10
9	Self-employment tax (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9	fill in the blank 11
10	Other taxes (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
11a	Add lines 8 through 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11a	fill in the blank 12
b	Earned income credit, refundable child tax credit* or additional child tax credit, fuel tax credit, net premium tax credit, refundable American opportunity credit, section 1341 credit, and refundable
	credit from Form 8885* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11b
11c	Total 2022 estimated tax. Subtract line 11b from line 11a. If zero or less, enter -0- . . . . . . . .	11c	fill in the blank 13
12a	Multiply line 11c by 90% (662/3% for farmers and fishermen) . . . . . . . . . . . . . . .	12a	fill in the blank 14
b	Required annual payment based on prior years tax (see instructions) . . . . . . . . . . .	12b
c	Required annual payment to avoid a penalty. Enter the smaller of line 12a or 12b . . . . . . . . . . . . . . .	12c
	Caution: Generally, if you do not prepay (through income tax withholding and estimated tax payments) at least the amount on line 12c, you may owe a penalty for not paying enough estimated tax. To avoid a penalty, make sure your estimate on line 11c is as accurate as possible. Even if you pay the required annual payment, you may still owe tax when you file your return. If you prefer, you can pay the amount shown on line 11c. For details, see chapter 2 of Pub. 505.
13	Income tax withheld and estimated to be withheld during 2022 (including income tax withholding on pensions, annuities, certain deferred income, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
14a	Subtract line 13 from line 12c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14a
	Is the result zero or less? Yes. Stop here. You are not required to make estimated tax payments. No. Go to line 14b.
b	Subtract line 13 from line 11c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14b
	Is the result less than $1,000? Yes. Stop here. You are not required to make estimated tax payments. No. Go to line 15 to figure your required payment.
15	If the first payment you are required to make is due April 18, 2022, enter 1/4 of line 14a (minus any 2021 overpayment that you are applying to this installment) here, and on your estimated tax payment
	voucher(s) if you are paying by check or money order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
* If applicable.

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Self-employed taxpayers are not subject to withholding; however, they must make quarterly estimated tax payments. Taxpayers with large amounts of interest, dividends, and other income not subject to withholding are also generally required to make estimated payments.

Any individual taxpayer who has estimated tax for the year of $1,000 or more, after subtracting withholding, and whose withholding does not equal or exceed the "required annual payment," must make quarterly estimated payments.

Payments are made in four installments on April 15, June 15, and September 15 of the tax year, and January 15 of the following year, based on the taxpayer's estimate of the amount of the tax liability for the year.

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