Question

When are taxes due on Roth IRA rollover?

Forum|Forum|6 years ago
January 21, 2020
1 reply
0 views

I have been retired for 5 years and am receiving deferred compensation (fully taxable) from my former employer. This year, I will only receive $30,000 in deferred compensation and so I elected to roll over $200,000 from my 401k into an IRA and then into a Roth IRA in January. I will pay taxes on the rollover from my bank account reserves. My question is, when do I pay the taxes on the rollover? Do I pay now, in the quarter the rollover occurred? Do I pay one quarter every quarter this year as estimated tax? Or can I just pay it all before the end of the year? I will receive half of the deferred compensation in February and the remaining half in August (taxes will be withheld by mu previous employer).

Thanks in advance,

Keith

M

MinhT1

The rollover from the IRA to a Roth IRA will be taxable. If federal (and state if applicable) tax has not been withheld, you'll need to pay estimated tax. The way to proceed would be to estimate the tax due (taking into account your deferred compensation in 2020 and the tax withheld) and to pay it in 4 equal installments on 4/15/2020, 6/15/2020, 9/15/2020 and 1/15/2021.

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K

ktm29564Author

Thanks. So I don't need to pay the entire tax liability in the quarter in which it was incurred?

D

dmertz

Employee

Unless you need to annualize income on Schedule AI of Form 2210 to avoid an underpayment penalty because you did not have sufficient tax withholding and sufficient estimated tax payments throughout the year, your income is treated as having been received uniformly throughout the year, so sufficient equal estimated tax payments for each of the 4 quarters of the year will avoid an underpayment penalty. If you do end up having an underpayment penalty and you made estimated tax payments equally in each of the 4 quarters instead of paying it for the Q1 tax quarter in which this large amount of income was actually received, annualizing income will not reduce your penalty.