@Xian2
If you don’t use form 2210 with the annualized method, then your penalty would be calculated as follows:
The tax due on $60,000 would be $13,200, divided into four equal installments is $3300 each. The IRS will assume that $3300 was due April 15, June 15, September 15, and January 15, 2024. If you pay the entire $13,200 before September 15, you will still be overdue by $3300 from April 15 through September and you will be overdue $3300 from June 15 through September. There is a penalty of 0.5% per month plus a variable interest rate, which is currently about 7% APR, for simplicity sake lets call it 1% total per month. That means the penalty would be $33 x 5 months for the first missed installment plus $33 x 3 months for the second missed installment, for a total of $264.
If you don’t make any estimated payment until you file your tax return in April, 2024, you would be overdue $3300 for 12 months, another $3300 would be overdue by 10 months, another $3300 would be overdue by 7 months, and the last $3300 will be overdue by 3 months, with each overdue amount accruing a penalty of 0.5% per month plus interest at 7% APR. (And if the federal reserve bank continues to increase interest rates, the IRS interest rate will also increase.). Using the IRS default method of penalty calculation, it doesn’t matter when in the year you make the conversion, the IRS will always assume that payments were due in four equal installments on April 15, June 15, September 15, and January 15.
I would not be intimidated by the form 2210 AI method. Using that method should completely eliminate any penalty, as long as you make the complete payment of $13,200 before the deadline for whichever quarter you perform the conversion. In other words, if you perform the conversion before August 31, the complete payment would be due September 15, and if you perform the conversion after September 1, the complete payment is due January 15, 2024. However, to be on the safe side and allow for banking delays, I would try to make the payment five days before the deadline.
