I’m retired (57yo) and have been paying quarterly estimated taxes based on last year’s tax return. The IRS estimated vouchers had me at $955 per quarter, which I’ve been paying.
This year I also did a partial traditional IRA to Roth conversion that will result in about an additional $5,000 in federal taxes owed
My question is about how to handle the remaining estimated payments? Do I need to split the extra $5,000 to my remaining payments in January and April? Or does this fall under the safe harbor rules and I only need to continuing to pay the original $955 per quarter and then pay the additional tax when I file in April without a penalty?
Thanks in advance for any guidance.
Do I need to adjust estimated quarterly taxes after Roth conversion?
byu/I_reddit_like_this intax
Posted by I_reddit_like_this
2 Comments
To see if you fall under safe harbor rules, is the amount you have withheld and prepaid this year 100% of your tax liability from last year? Line 24 of the 1040? Or 110% if your income was over 150k last year.
I’m in a similar boat. To avoid any penalties I’m just going to pay the full estimated tax bill for Q4 covering both the Q4 estimated taxes and that owed on the conversion, by January 15th (the Roth conversion was in November). It’ll all tally up a couple months later with my tax return.
I could tickle with the safe harbor of “at least 100% of last tax year’s taxes” but the timeframe of Jan 15 vs April 15 isn’t worth the stress (vs the potential gains of those three months by retaining the cash flow in investments).
[https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty](https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty)