Okay, for the sake of calculation, let me put it this way.
If I pay 20% federal tax of $25,000, it's $5,000.
Say I add this amount to my estimated income of $30,000, for example. Now, it's $55,000.
As I pay the federal tax upfront, the actual amount to convert to Roth IRA is $20,000.
Then, my total estimated income is $50,000, which puts me in the 12% federal tax bracket.
Here, my tax is $6,000 ($50,000 divided by 0.12). But as I have paid $2,000 upfront in federal taxes,
the total taxes I would pay would be $8,000.
Now, let me withhold the federal tax and add the whole contribution ($25,000) to my estimated income.
It's now $55,000, which puts me in the 12% federal tax bracket.
So, 12% of $55,000 (assuming I withhold the federal tax) is $6,600.
In other words, $8,000 vs $6,600, to put it simply. Withholding is more beneficial to me, isn't it?
Am I right or wrong?
