This year Lloyd, a single taxpayer, estimates that his tax liability will be $13,000. Last year, his total tax liability was $17,000. He estimates that his tax withholding from his employer will be $9,700.

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. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Over (Under) Penalty Per Quarter Actual Withholding Dates Required Withholdina Withheld April 15th June 15th September 15th January 15th Total