When to pay tax for Roth conversion that I did on 12/31/24

[easyroc]

I converted a good chunk of Rollover IRA to Roth IRA on 12/31/24. I don't want to pay any penalty/interest so when do I need to the tax on it? I heard I need to pay for the estimated quarterly tax by 1/15/25 but I am not sure.

Thank you in advance

[FiveK]

Does the Safe harbors wiki section help?

[N.Y.Cab]

Use the 1040 Tax Calculator to see how big the estimated tax should to be to get you a refund.

https://www.dinkytown.net/java/1040-tax-calculator.html

[BoomerChiefsFan]

I did my first ever Roth conversion around Christmas time. I asked my tax CPA and she told me Jan-15 as well. Since I haven’t been through this yet I’d like others to chime in, but I’m hoping that is correct.

[Silk McCue]

I did my first ever Roth conversion around Christmas time. I asked my tax CPA and she told me Jan-15 as well. Since I haven’t been through this yet I’d like others to chime in, but I’m hoping that is correct.

Yes. That’s correct.

Cheers

[legolast]

My understanding of this based on what I've read, is that since I paid estimated taxes in 2024 equal to 100% of the tax that I owed in 2023, I've achieved safe harbor and I wouldn't need to pay what I would owe on the large Roth conversion completed in Dec 2024, until April 15, 2025.

You withheld at least 100% (110% if your adjusted gross income for that year was more than $150,000, or $75,000 if married filing separately) of your "prior year’s tax" (see Form 2210 instructions for what "prior year's tax" includes).

[cas]

I did my first ever Roth conversion around Christmas time. I asked my tax CPA and she told me Jan-15 as well. Since I haven’t been through this yet I’d like others to chime in, but I’m hoping that is correct.

Yes. That’s correct.

Cheers

It might be only half correct.

Yes, at this late date, if you have not yet met a Safe Harbor by other means, in order to avoid an underpayment penalty, it is *necessary* to make an estimated tax payment by the 1/15/2025 deadline.

However, all by itself, an estimated tax payment by 1/15/2025 may not be *sufficient* to avoid an underpayment penalty. (It depends on the exact circumstances of the individual tax payer.)

The IRS offers multiple ways to *make* it sufficient.

Please see the Safe Harbors article linked by FiveK above.

After reading that ... Do you know which Safe Harbor approach you want to use? Or do you have further questions?

[cas]

My understanding of this based on what I've read, is that since I paid estimated taxes in 2024 equal to 100% of the tax that I owed in 2023, I've achieved safe harbor and I wouldn't need to pay what I would owe on the large Roth conversion completed in Dec 2024, until April 15, 2025.

You withheld at least 100% (110% if your adjusted gross income for that year was more than $150,000, or $75,000 if married filing separately) of your "prior year’s tax" (see Form 2210 instructions for what "prior year's tax" includes).

Since you paid via estimated taxes ... as opposed to withholding (like from a paycheck or pension payment or tIRA withdrawal) ... there is an additional condition you need to meet to achieve Safe Harbor.

Do you know what that condition is?

[legolast]

My understanding of this based on what I've read, is that since I paid estimated taxes in 2024 equal to 100% of the tax that I owed in 2023, I've achieved safe harbor and I wouldn't need to pay what I would owe on the large Roth conversion completed in Dec 2024, until April 15, 2025.

Since you paid via estimated taxes ... as opposed to withholding (like from a paycheck or pension payment or tIRA withdrawal) ... there is an additional condition you need to meet to achieve Safe Harbor.

Do you know what that condition is?

No. Does it have something to do with:

If you make estimated tax payments instead of or in addition to withholding, and don't meet any of the safe harbors, no penalty is due if you meet safe harbor criteria #2 or #3 for each estimated tax "quarter".

?

I also read on "thefinancebuff" about this and thought I was "safe".

[cas]

Do you know what that condition is?

No. Does it have something to do with:

If you make estimated tax payments instead of or in addition to withholding, and don't meet any of the safe harbors, no penalty is due if you meet safe harbor criteria #2 or #3 for each estimated tax "quarter".

?

Yes.

Did you make 4 quarterly estimated tax payments, either equal or front-loaded towards the earlier tax quarters, meeting each quarterly estimated tax deadline? (typically 4/15, 6/15, 9/15, 1/15 of the next year)?

(If you did not, there may still be ways to save the day. That Safe Harbor article talks about that.)

[legolast]

No. Does it have something to do with:
?

Yes.

Did you make 4 quarterly estimated tax payments, either equal or front-loaded towards the earlier quarters, meeting each quarterly estimated tax deadline? (typically 4/15, 6/15, 9/15, 1/15 of the next year)?

(If you did not, there may still be ways to save the day. That Safe Harbor article talks about that.)

So, for example, if I owed $10,000 in tax in 2023. I would pay $2500 on 4/15/2024, 6/17/2024 (because 6/15 fell on a weekend), 9/16/2024 (again weekend) and then pay $2500 on 1/15/2025.

Then, since I did a large Roth conversion in December 2024, I might owe $40,000 in tax in 2024. So I would pay $30,000 ($40,000 owed less $10,000 already paid in estimated taxes) on 4/15/2025 and then pay $11,000 each quarter in 2025 (110% since my AGI is over $150,000).

Does that sound correct? If so that's what I did / am doing.

[cas]

Yes.

Did you make 4 quarterly estimated tax payments, either equal or front-loaded towards the earlier quarters, meeting each quarterly estimated tax deadline? (typically 4/15, 6/15, 9/15, 1/15 of the next year)?

(If you did not, there may still be ways to save the day. That Safe Harbor article talks about that.)

So, for example, if I owed $10,000 in tax in 2023. I would pay $2500 on 4/15/2024, 6/17/2024 (because 6/15 fell on a weekend), 9/16/2024 (again weekend) and then pay $2500 on 1/15/2025.

Then, since I did a large Roth conversion in December 2024, I might owe $40,000 in tax in 2024. So I would pay $30,000 ($40,000 owed less $10,000 already paid in estimated taxes) on 4/15/2025 and then pay $11,000 each quarter in 2025 (110% since my AGI is over $150,000).

Does that sound correct? If so that's what I did / am doing.

Yes, that sounds like you met Safe Harbor.

(The difference from doing it via withholding is that withholding is always considered "timely," no matter when in the year it is paid, so as long as you *withheld* the $10,000 (attributed to tax year 2024) by 1/15/2025, you would have met Safe Harbor. )

And for people who read the exchange with legolast and are now freaking out that they had a big 4th quarter Roth conversion and were planning on making a big estimated tax payment by 1/15/2025 to cover it ... there are still ways to save the day. Go read the Safe Harbors wiki article and come back with any questions.

[legolast]

So, for example, if I owed $10,000 in tax in 2023. I would pay $2500 on 4/15/2024, 6/17/2024 (because 6/15 fell on a weekend), 9/16/2024 (again weekend) and then pay $2500 on 1/15/2025.

Then, since I did a large Roth conversion in December 2024, I might owe $40,000 in tax in 2024. So I would pay $30,000 ($40,000 owed less $10,000 already paid in estimated taxes) on 4/15/2025 and then pay $11,000 each quarter in 2025 (110% since my AGI is over $150,000).

Does that sound correct? If so that's what I did / am doing.

Yes, that sounds like you met Safe Harbor.

(The difference from doing it via withholding is that withholding is always considered "timely," no matter when in the year it is paid, so as long as you *withheld* the $10,000 (attributed to tax year 2024) by 1/15/2025, you would have met Safe Harbor. )

And for people who read the exchange with legolast and are now freaking out that they had a big 4th quarter Roth conversion and were planning on making a big estimated tax payment by 1/15/2025 to cover it ... there are still ways to save the day. Go read the Safe Harbors wiki article and come back with any questions.

OK, thanks for confirming I have it right. And hopefully the OP and others can learn from the info.

I know I paid a "small" penalty years ago when I sold "something" in the fourth quarter and thought I had until 4/15 to pay the tax.

[easyroc]

Sorry I am new at this. I only made about 13,000 in 2024 as I was only partially employed. I converted 40,0000 from IRA to Roth IRA on 12/31/24. So that gives me an income of 53k. Minus $14,600 standard deduction, my income is 38,400 which is in the bracket of 12%.

ChatGTP says I owe 4,300. So I need to pay this amount by 1/15/25. Is it better to overpay and get some back later, or pay exact amount?

Thank you so much!

[WeakOldGuy]

In general I think it is best to either pay what you think you will owe, or the amount that will get you to the Safe Harbor amount. I think trying to use the IRS as a place to hold your money for several months, without paying you interest, is not a sound savings plan.