Roth conversion taxes

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friar1610
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Roth conversion taxes

Post by friar1610 »

If I do a Roth conversion from my t-IRA in December, when will the taxes on the converted money be due?
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Gill
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Re: Roth conversion taxes

Post by Gill »

It depends. If you have already paid enough in during the year to satisfy the safe harbor rules you need pay nothing until April 15th. If that is not the case you may be obligated to make an estimated payment by January 15th.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
retiredjg
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Re: Roth conversion taxes

Post by retiredjg »

friar1610 wrote: Tue Sep 15, 2020 4:34 pm If I do a Roth conversion from my t-IRA in December, when will the taxes on the converted money be due?
Depends.

April 15 is the day all taxes are due. But if it is a large conversion and you cannot meet one of the safe harbors of tax withholding, you need to make an estimated payment by January 15 I believe.
Topic Author
friar1610
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Re: Roth conversion taxes

Post by friar1610 »

Gill and retiredjg,

Got it. Thanks.
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Housedoc
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Re: Roth conversion taxes

Post by Housedoc »

If you live in a state with income taxes, don't forget to pay them also. I do mine quarterly on my conversions.
FactualFran
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Re: Roth conversion taxes

Post by FactualFran »

retiredjg wrote: Tue Sep 15, 2020 4:36 pm April 15 is the day all taxes are due. But if it is a large conversion and you cannot meet one of the safe harbors of tax withholding, you need to make an estimated payment by January 15 I believe.
If it is a large conversion, then even if an estimated payment is made by January 15, the IRS could charge an underpayment penalty. The penalty can be reduced or eliminated by filing Form 2210 with Schedule AI is completed. Completing Schedule AI is time consuming: the income tax owed on the annualization of the income through the end of each quarter is calculated.
Escapevelocity
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Re: Roth conversion taxes

Post by Escapevelocity »

FactualFran wrote: Tue Sep 15, 2020 6:40 pm
retiredjg wrote: Tue Sep 15, 2020 4:36 pm April 15 is the day all taxes are due. But if it is a large conversion and you cannot meet one of the safe harbors of tax withholding, you need to make an estimated payment by January 15 I believe.
If it is a large conversion, then even if an estimated payment is made by January 15, the IRS could charge an underpayment penalty. The penalty can be reduced or eliminated by filing Form 2210 with Schedule AI is completed. Completing Schedule AI is time consuming: the income tax owed on the annualization of the income through the end of each quarter is calculated.
Define large
Topic Author
friar1610
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Re: Roth conversion taxes

Post by friar1610 »

Escapevelocity wrote: Tue Sep 15, 2020 6:43 pm
FactualFran wrote: Tue Sep 15, 2020 6:40 pm
retiredjg wrote: Tue Sep 15, 2020 4:36 pm April 15 is the day all taxes are due. But if it is a large conversion and you cannot meet one of the safe harbors of tax withholding, you need to make an estimated payment by January 15 I believe.
If it is a large conversion, then even if an estimated payment is made by January 15, the IRS could charge an underpayment penalty. The penalty can be reduced or eliminated by filing Form 2210 with Schedule AI is completed. Completing Schedule AI is time consuming: the income tax owed on the annualization of the income through the end of each quarter is calculated.
Define large
Not the person you asked but the OP. WILL BE ABOUT $100k conversion. 22% fed bracket.
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FactualFran
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Re: Roth conversion taxes

Post by FactualFran »

Escapevelocity wrote: Tue Sep 15, 2020 6:43 pm
FactualFran wrote: Tue Sep 15, 2020 6:40 pm If it is a large conversion, then even if an estimated payment is made by January 15, the IRS could charge an underpayment penalty. The penalty can be reduced or eliminated by filing Form 2210 with Schedule AI is completed. Completing Schedule AI is time consuming: the income tax owed on the annualization of the income through the end of each quarter is calculated.
Define large
One condition is that the income tax for a year, where the income includes the conversion, is at least $1,000 more than the amount withheld for the year.
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FiveK
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Re: Roth conversion taxes

Post by FiveK »

Escapevelocity wrote: Tue Sep 15, 2020 6:43 pm
FactualFran wrote: Tue Sep 15, 2020 6:40 pm
retiredjg wrote: Tue Sep 15, 2020 4:36 pm April 15 is the day all taxes are due. But if it is a large conversion and you cannot meet one of the safe harbors of tax withholding, you need to make an estimated payment by January 15 I believe.
If it is a large conversion, then even if an estimated payment is made by January 15, the IRS could charge an underpayment penalty. The penalty can be reduced or eliminated by filing Form 2210 with Schedule AI is completed. Completing Schedule AI is time consuming: the income tax owed on the annualization of the income through the end of each quarter is calculated.
Define large
Enough that Form 2210 (w/o using Schedule AI) calculates a penalty.

See this post in Re: Witholding taxes if estimated tax payments already cover 100% of last years tax amount for an example of lines 18-27 in form 2210 when there is not a penalty.
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