Federal Tax Law Practice Exam – Complete 10-Hour Prep 2026

Individuals with a tax liability of zero last year are exempt from the requirement to pay estimated taxes because the estimated tax system is intended to ensure that taxpayers pay their tax liabilities throughout the year. If a taxpayer had no tax liability in the previous year, this suggests that they may not owe taxes in the current year either, provided they meet certain criteria regarding income and filing status.

This exemption exists to simplify the tax process for those who consistently do not have a tax liability, preventing them from having to make estimated tax payments when they might not owe anything at all. Generally, individuals must have a tax liability in the previous year and expect to have a tax liability again in the current year to be required to make estimated tax payments.

The other options presented do not reflect the criteria for exemption accurately. While retirees and full-time employees may or may not have tax liabilities, their employment status or age does not automatically exempt them. Individuals with annual incomes over $200,000 may have substantial tax liabilities and are usually required to pay estimated taxes unless their situation fits the criteria for exemption, such as having no tax liability the previous year.