Roth coversion from an IRA

How do people typically come up with the money to pay the taxes on a conversion to a Roth IRA?



  • In the vast majority of cases, the taxes are paid from other funds they have. It is not beneficial to have the taxes withheld from the TIRA distribution since this results in reduced assets in tax deferred accounts and if the taxpayer is under 59.5, it results not only in taxes on the withheld taxes, but a 10% penalty on that amount as well.
  • If paid from withholding the taxes are considered paid througout the year, rather than the date they are actually paid.
  • If paid from other outside funds, the additional taxable income can result in having to pay quarterly estimates or to increase withholding from other income sources such as pensions, SS, or wages. In total, tax payments must meet one of the safe harbor requirements to avoid underpayment penalties (100% or 110% for higher incomes of prior year taxes or 90% of current year taxes).


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