You can do what you are planning...if...you also fill out Schedule A1 of Form 2210 that shows the taxes were paid tiimely with the income. If you don't do the form, it appears to the IRS that you took income all year and simply didn't pay tax until the end of the year. There is a penalty for doing that.43 MFJ
Tax due for the conversion would be paid from my taxable account. With estimated quarterly tax payments, I would owe a significantly greater amount in Q4 compared to the other quarters. My concern is the IRS doesn’t seem to have knowledge about when an income event occurs and would therefore penalize me for underpayment in Q1, Q2, and Q3.
Thanks.
I was planning on doing a roth conversion in the next week. I was under the assumption that I do the conversion and then go on the federal tax website and pay all the estimated tax from a HYSA taxable account on the conversion (that day just to be safe ). Would this trigger an underpayment penalty because I didn’t make any tax payments in Q1-3? I’ve never thought that would be an issue if the full amount was paid the day or in proximity of the conversion. Am i misinterpreting this thread ?
https://www.irs.gov/instructions/i2210
Or you could have estimated your taxes at the beginning of the year and pay more or less equal amounts in the 4 quarters. Good planning tip for next year.
Or you can do the conversion and withhold the taxes at the time of the conversion. If you want to make the conversion whole, do a 60 day rollover of the amount of the taxes into the Roth IRA (tell your custodian it is a 60 day rollover, not a contribution). You can only do an indirect rollover like this one time in 365 days so plan carefully for next year if you want to do it this way again.
Statistics: Posted by retiredjg — Tue Nov 19, 2024 6:18 am