Paying Taxes for Roth IRA conversion

[doctaxquestion]

I contributed $6000 each in 2019 and 2020 to an IRA, which was non-deductible because of income being too high. The appropriate form 8606 was filed with my 2019 return. I just converted the IRA to a Roth but the amount was above $12k as it was invested. My understanding is I will owe taxes on the amount above $12k. How can I compute that tax and how can I make that payment? I used TurboTax Premier for 2019. Thanks

[macuser_22 · Accepted solution]

You don't on your 2019 tax return.   You report the 2020 contribution an Roth conversion next year on your 2020 tax return.

The tax will be computed on a 2020 8606 form.   If the 2020 December 31, value of all Traditional IRA accounts is zero then  the $12K of basis will offset $12K of the conversion, any additional amount converted will be taxed as ordinary income at your marginal tax rate.

[doctaxquestion]

Thanks a lot! And TurboTax will be able to make that calculation? I read somewhere that I should pay the tax asap and not wait for when I file the taxes? My tax owed will probably be between $100-150 so not a big amount.

[macuser_22]

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@doctaxquestion wrote:

Thanks a lot! And TurboTax will be able to make that calculation? I read somewhere that I should pay the tax asap and not wait for when I file the taxes? My tax owed will probably be between $100-150 so not a big amount.

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Yes, when you enter the 2020 1099-R.

You only need to pay estimated tax when you expect to have to pay $1000 or more to the IRS for 2020 tax.

[fanfare]

the 2020 tax is payable in April 2021. 

You don't want to pay that in advance.

Paying the 2019 tax should be enough for you.

[doctaxquestion]

Thank you. Doing the same for my wife (we file jointly, i am primary tax payee) and she has ~28k in her traditional IRA out of which 12 k is non-deductible and the remainder was rolled over from a prior employer's 403b plan. That would mean we owe >$1000 in taxes which I should probably pay in advance. How can I make that estimated advance tax payment in her name?

[macuser_22]

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@doctaxquestion wrote:

Thank you. Doing the same for my wife (we file jointly, i am primary tax payee) and she has ~28k in her traditional IRA out of which 12 k is non-deductible and the remainder was rolled over from a prior employer's 403b plan. That would mean we owe >$1000 in taxes which I should probably pay in advance. How can I make that estimated advance tax payment in her name?

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There is only tax if money was taken out.   A rollover is not taxable.

If you had a taxable distribution then see this IRS article about how to pay estimated tax.

https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

[doctaxquestion]

Yes, I understand that the 403b to Traditional IRA rollover is not taxable and we did not pay any taxes when we did that last year. Now the entire traditional IRA is being converted to a Roth. Wouldn't that make that entire amount taxable (minus any non deductible contributions when AGI were high) now since it is all pretax money?

[macuser_22]

If you are converting to a Roth then yes, all of the before-tax money will be taxable as ordinary income.

As said above, if your except to owe $1000 or more in additional tax  on your 2020 tax return they you should pay estimated tax to avoid an underpayment penalty.

[doctaxquestion]

You're awesome. One final question. If I use the website pay1040 to make an online estimated tax payment, do I still need to file a 1040ES without the payment enclosed?

[VolvoGirl]

No if you pay online you don't mail anything in.  

I dont know that website but you can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2020 Estimate