Compute the underpayment amount for each quarter

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Question - Your friend, Bob, recently lost his job. He started his own business to try to make ends meet. He also works at the local McDonald's to bring in some extra cash. Bob knew he needed to make estimated tax payments for his business, in addition to the withholding on his McDonald's pay. He made the following payments:

4/15/13 $1,000

6/15/13 500

9/15/13 500

1/15/14 5,000

Bob fears he is going to owe underpayment penalties. He has asked you to compute the amount of the underpayment (not the actual penalty) for him.

Bob provides the following, relevant information:

2012 taxes paid $15,000

2013 taxes calculated 14,500

Total withholding 5,000

Compute the underpayment amount for EACH quarter and the period upon which the penalty will be computed. Note: Bob's AGI is less than $100,000. ALSO find and print the IRC section that describes the overpayment and underpayment penalty interest rates. You DO NOT need to calculate the interest Bob must pay!

Reference no: EM131915379

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