Calculating Required Installment Payments for NB Incorporated

What are the required installment payments for NB Incorporated in 2022 based on different taxable incomes?

Answer:

To determine the required installment payments for NB Incorporated in 2022, we need to consider the company's taxable income for the year. In this case, we are given three different taxable incomes for 2022: $404,000, $979,000, and $1,195,000. The installment payments are calculated based on the estimated tax liability and the installment method. Let's break down the calculations for each scenario:

Scenario (a) - $404,000 Taxable Income:

For the taxable income of $404,000, NB Incorporated can use the safe harbor method to determine the total installment payments. The safe harbor method requires paying 100% of the previous year's tax liability in equal installments. Since NB's federal taxable income in 2021 was $272,000, the required total installment payments for 2022 would be $272,000.

Scenario (b) - $979,000 Taxable Income:

When the taxable income increases to $979,000, NB Incorporated can calculate the total installment payments using the annualized income method. This method allows the company to base its estimated tax payments on the actual income earned and the corresponding tax rates for each period.

Scenario (c) - $1,195,000 Taxable Income:

While the data does not provide a specific calculation for $1,195,000 taxable income, the required total installment payments would be based on the estimated tax liability for this income level.