2nd Roth Conversion
I’m uncertain how this impact taxes due and when the taxes may be due. This is the 2nd year that I converted $25,000 from my IRA to my Roth. I’ve done the conversion in the last two weeks of 2020 and now 2021. Last year I had a sizable tax bill due that was expected with no penalties. I’m still working and have withholding for my salary but did not withhold any taxes for either conversion. I ran some projections with my Tax program and it appears that I may owe a penalty becasue I own more than 90% of the taxes due and more that $110% of the taxes I paid last year (mainly due to the 2020 conversion). I thought I could file a quarterly estimated tax payment by Jan 15th for the shortage in the 110% rule but now I’m not sure. I’ve read on this site and others I don’t have to pay the amount due until April 15th. When should I pay the taxes to avoid a penalty or is it too late and will be assessed a penalty in April when I file regardless if I pay by Jan 15th or April 15th? Thanks for helping clarify this.
Permalink Submitted by David Mertz on Thu, 2022-01-13 03:48
It sounds like you do not meet any of the safe harbors to avoid an underpayment penalty without making an estimated tax payment by January 15. Even doing that you’ll need to annualize income on Schedule AI of Form 2210 to eliminate the penalty. Unless you already have detailed records of how much income you received in each tax quart, preparing Schedule AI can be quite time consuming. If you wait beyond January 15 to pay the outstanding tax (and do not file and pay by January 31), you’ll still have some penalty even if you annualize.
Permalink Submitted by Roy Neese on Thu, 2022-01-13 05:14
I do recall seeing something about scheduleing income on form 2210. So if that is the case, the only way to avoid the penalty is to fill out this schedule AI on form 2210 completed and filed by the 15th (2 day). I know what I’m doing the next 2 days. Thank you very much.
Permalink Submitted by David Mertz on Thu, 2022-01-13 14:25
Form 2210 and its Schedule AI are to be filed as part of your income tax return and your tax software should guide you through that. Only the estimated tax payment needs to be made by January 15, which can be done by IRS Direct Pay.
Permalink Submitted by Roy Neese on Thu, 2022-01-13 21:21
DMx, Thank you. I see, mailing off the voucher/pmt now. I’m not setup with IRS direct pay yet (applied but will be 10 days for PIN). I see how the tax software will include a schdule to help avoid the penalty. Thanks again for your help.