This year Lloyd, a single taxpayer, estimates that his tax liability will be $12,000. Last year, his total tax liability was $16,000.

He estimates that his tax withholding from his employer will be $9,020. (Do not round intermediate calculations. Omit the "$" sign in your response.)

a.	How much does Lloyd need to increase his withholding by (for the year), in order to avoid the underpayment penalty?

Increase in withholding

$

b.	Assuming Lloyd does not make any additional payments, what is the amount of his underpayment penalty? Assume the federal short-term rate is 5%.

Underpayment penalty

$