This year Lloyd, a single taxpayer, estimates that his tax liability will be $12,850. Last year, his total tax liability was $16,900. He estimates that his tax withholding from his employer will be $9,605.

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 percent. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Dates	Actual Withholding	Required Withholding	Over (under) Withheld	Penalty Per Quarter
April 15th
June 15th
Sept. 15th
January 15th
Total