Year End Roth Conversion

Forum|Forum|1 year ago
December 22, 2024
1 reply
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I made a small year end Roth conversion (Direct distribution from my 401k to a Roth IRA in December 2024). No tax was withheld. I did a mock tax return for 2024 and determined that through payroll and pension deductions I have overpaid my federal taxes, including consideration of the Roth Conversion. Would Uncle Sam still expect an estimated tax payment on the conversion before the end of the year.

Bsch4477

Employee

No. Sounds like you’re good.

vasto7Author

Thanks for the reply. I am also planning on doing a Roth conversion in January of next year. Is it acceptable to pay the tax on the conversion from withholdings from a monthly pension spread over the entire year rather than doing estimated quarterly payments? If done by quarterly estimated payments, can the tax bill be spread over all quarters from the conversion or must the entire tax bill be paid in the quarter of the conversion. Are the rules for withholdings different, i.e., can the taxes from withholdings for the conversion could be left to later in the year, even if the conversion was made a the beginning?

dmertz

Employee

"Is it acceptable to pay the tax on the conversion from withholdings from a monthly pension spread over the entire year rather than doing estimated quarterly payments?"

Yes. By default, both income and withholding are treated as having been received and paid evenly throughout the year. The source of the tax withholding is irrelevant.

"If done by quarterly estimated payments, can the tax bill be spread over all quarters from the conversion or must the entire tax bill be paid in the quarter of the conversion."

Because income, by default, is treated as received evenly throughout the year, estimated taxes can be split into equal payments for each of the tax quarters.

Withholding, by default is treated as paid evenly throughout the year no matter when it is actually paid while estimated tax payments are treated as paid when actually paid.