When converting large amounts from a tax deferred retirement account to a taxable ROTH account, this can create a PITA on the tax front. The IRS computers see a sudden "jump" in taxable income for that quarter and can potentially flag it for underwithholding penalties on the W-2 withholding tax front, or underpayment penalties on the quarterly tax front. This results in a computer generated underpayment/under withholding penalty be assessed, and no human at the IRS will be aware of this unless and until *YOU* say something to a living human at the IRS. That's what as the potential to make this a real PITA.
However, you can avoid the possibility of this headache if you pay your taxes on the converted amount as a quarterly tax payment, in the quarter the conversion (or conversions if done more than once in a tax year) take place. It's easiest to do online at www.irs.gov/payments.
