The IRS and state tax agencies work on a "pay as you go" system. What this means is that the taxes are to be paid regularly throughout the year for the income that you receive. An example of this would be the tax withholdings from wage income - these are withheld on a regular basis as the income is earned.
Now let's use your Roth conversion as an example for when you may get an underpayment penalty - you made the Roth conversion in February 2025, but instead of increasing withholdings on other pensions, you decided to make a big estimated payment to the IRS in December 2025. Even if you had made enough of a payment to cover your tax liability and get a refund, the payment of taxes was not made on a timely basis and a penalty would be assessed for underpaying in the early part of the year. So it is still possible to get an underpayment penalty assessed even if getting a refund.
That's why estimated payments are set up to be submitted on a regular basis - usually April 15, June 15, September 15, and January 15 of the following year. These payments will be considered to be made "timely" to help avoid underpayment penalties.
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