What is the estimated tax payment requirement for Fatin if her withholding and credits are less than 90% of her tax liability?

The estimated tax payment requirement is determined by the IRS guidelines, which typically stipulate that if a taxpayer's withholding and credits are less than 90% of their total tax liability for the year, they may be required to make estimated tax payments. In this case, since Fatin's withholding and credits fall short of this threshold, she is liable for a specific amount in estimated tax payments.

When taxpayers face insufficient withholding, one common requirement is that they must pay the lower of 100% of the prior year’s tax liability or 90% of the current year’s liability. This serves as a safeguard to ensure that taxpayers do not face a penalty for underpayment. Many taxpayers base their estimated payments on the previous year’s tax liability, especially when they are unsure about their current year's situation.

Given the option of $250, this amount may align with her overall tax strategy based on her prior year’s obligations. Therefore, since $250 likely strikes a balance between her estimated needs and IRS guidelines for compliance, it is positioned as the correct payment requirement to avoid any penalties. In essence, this choice reflects the IRS's intention to prevent underpayment while allowing taxpayers to manage their finances without overstretching their immediate cash flow.

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