During 2023 I encountered an underpayment penalty from both the IRS and State that appear to be due to a Roth Conversion and RMD from an inherited IRA performed late in the year (December). Despite having paid more tax than owed and more taxes than 2022 - the IRS still imposed the penalty and would not provide any relief. Note that I did pay estimated quarterly taxes based on income calculations for each quarter throughout the year.
In researching the situation it appears that my paying the taxes as part of the Q4 estimated tax payment may be part of the issue. I understand that had I elected to withhold taxes as part of the Roth conversion and as part of the inherited IRA RMD distribution - the same amount of taxes would have been paid but the underpayment penalty would have been avoided.
Can someone confirm or refine the understanding above? I will likely have a similar situation again this year and would like to avoid the underpayment penalty.
