Regular Roth Conversions
Regular Roth conversions add to my taxable income (as distributions), and cause it to be uneven. Using the IRS 2210 form and estimated taxes has become routine, so here is my question: anyone have an idea why the 2210 (A1-line 20) expects one to have already paid in 45% for Q2 (period b) after only 5 months of year (41.6%)? 90% of 41.6 is 37.5%! Same for Q3 at 8 months (66.6%) They expect you to have paid 67%? At 90% of 66.6, this should be 60%!
Because I incorporated 2210 info in my excel spreadsheet so I can calc what I need to pay for Est Tax but dialed in too close, if I increase my conversion later in year, a penalty will pop up for Q2 and then Q3. In light of an increased IRMAA, I’d like to increase this year’s conversion. If my income was paid weekly, I could rationalize including half the June withholdings for period “b” Q2. Any insight would be appreciated. I also wonder if IRS would fix if it is indeed an error on their part. Thank, Ron
Permalink Submitted by David Mertz on Thu, 2021-10-28 01:32
22.5% is 1/4 of the 90% of tax liability safe harbor, 45% is 2/4, 67.5% is 3/4, and 90% is the entire safe harbor amount. It’s that amount that must be paid from the beginning of the year through the end of the quarter to meet this safe harbor for that quarter. It has nothing to do with the number of months in the tax “quarter.”
Permalink Submitted by Ron Corcoran on Sat, 2021-10-30 13:44
When I look at IRS 2210 Sch A1 line 20 .. noting date-range at top of column, I see 45% due for May-31. So instead of having the traditional 90% paid in, one needs to have 110% albeit payable by 6/15 (for period ending 5-31). I know this isn’t the tax qtr per se, but it is the 1st 5 months of the year, not 6.