Estimated taxes and Roth IRA conversion

Forum|Forum|1 year ago
March 14, 2025
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Hello, I plan on doing an IRA to Roth conversion in December of 2025. Can I pay all the taxes due at the time of conversion or do I need to make quarterly payments prior to the conversion? Thanks, DR

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RobertB4444

The IRs expects to be paid when you receive the money. However, they base the amount that you owe for each year on the amount that you owed the prior year.

So it may be ok. Depends on how much you owe. If the amount is a lot then the IRS may charge you a penalty for not making an estimated payment when you receive it.

But - most importantly - the IRS views taxes withheld on a W2 or a 1099 to have been paid equally every day of the year. Even if the taxes were all withheld in December. The smartest play here is to have the broker that is handling the transfer for you withhold the taxes for you and then you're all set. It won't matter to the IRS what date you pulled the money out. You'll be covered.

@rogersdan164

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rogersdan164Author

Employee

Robert, thank you for the response. If I understand you correctly, I can make the conversion in December as long as I pay the tax at the time of the conversion (or sooner) in this case. December. However, I don't want to reduce the amount of the conversion by having my broker deduct the taxes from the converted amounts. I'll pay the taxes from non-retirement funds and I'll pay the tax with estimated tax filing in the 4th quarter. Do you think that this strategy will avoid any IRS penalties? Thanks again. DR

RobertB4444

It should. But it will require you to fill out the annualized income portion of form 2210 to show that all of the conversion amount was received and paid for in the 4th quarter.

@rogersdan164

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