Estimated tax payment due date on Roth conversions
I have the impression that estimated tax payments are due for the quarter in which the Roth conversion takes place (on the taxable amount of the conversion). However, I’ve also seen references to considering the conversion as having taken place at the end of the tax year. I would appreciate clarification on precisely when the estimated tax for Roth conversions is due. FYI, this affects Form 2210 and annualized income, a bear to fill out, but worth it to eliminate underpayment penalties. Thank you.
Permalink Submitted by mk foss on Sun, 2009-04-05 03:05
I’ve never seen reference to treating the Roth conversion as happening at the end of the year for purposes of annualizing income on Form 2210. However, some people avoid paying tax on the conversion currently by relying on the prior year tax safe harbor (100%/110%). That presumes that the Roth conversion will increase income. If the taxable income including the current year conversion will be less than the prior year tax, annualizing using Form 2210 – and dropping the conversion into the proper quarter is the way to avoid penalties.
With penalties at a historically low rate, maybe a little underpayment penalty isn’t so bad. Could it stimulate the economy?