Question

multiple select question
select all that apply
which of the following choices are forms of tax prepayments?
□ a tax credit used to reduce the tax liability in the current year
□ estimated tax payments the taxpayer made directly to the irs
□ income tax withheld from a taxpayer’s salary or wages by an employer
□ a tax refund received in the current year for the prior year
□ an overpayment of taxes in the prior year that was applied as an estimated payment for the current year

Explanation:

• Option 1 (A tax credit...): A tax credit reduces tax liability, not a prepayment (prepayments are amounts paid before tax liability is calculated), so this is not a prepayment.
• Option 2 (Estimated tax payments...): Estimated tax payments are direct payments to the IRS for current - year taxes, so this is a prepayment.
• Option 3 (Income tax withheld...): Withholding from salary/wages by an employer is a prepayment of income tax.
• Option 4 (A tax refund...): A tax refund is money received back, not a prepayment.
• Option 5 (An overpayment...): An overpayment from the prior year applied as an estimated payment for the current year is a prepayment for the current year.

Answer:

B. Estimated tax payments the taxpayer made directly to the IRS
C. Income tax withheld from a taxpayer’s salary or wages by an employer
E. An overpayment of taxes in the prior year that was applied as an estimated payment for the current year