Roth IRA conversion 22k in 4th quarter 2018. Do I pay estimated tax by 1/15/2019 OR can I file and pay when I file as long as I pay 100% 2017 tax liability?

Forum|Forum|7 years ago
June 1, 2019
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dmertz

Level 15

The US tax system is a pay-as-you-go system. A sufficient amount of tax withholding or estimated taxes are generally expected to be paid by the quarterly due date, in this case, 1/15/2019. There are several safe harbors that will avoid the underpayment penalty if the balance due is paid by the due date of the tax return, April 15, 2019, such as having a balance due of no more than $1,000 or 100% of your 2017 tax liability, but the $22k of additional income resulting from the Roth conversion could put you over the amount covered by any of the safe harbors. It would be best to make an estimated tax payment by the 1/15/2019 due date sufficient to cover your tax liability for the year when added to your other tax withholding and estimated tax payments for the year, but you should pay enough tax withholding and estimated taxes by 1/15/2019 to at least be sufficient to bring you to the amount of your 2017 tax liability or to within $1,000 of your anticipated 2018 tax liability.

Topic Number 306 - Penalty for Underpayment of Estimated Tax: https://www.irs.gov/taxtopics/tc306

colecoalkohlAuthor

Level 2

So, even if last years tax liability was 3k and I pay that this year, I would still have to pay tax on 22k conversion to come within the 1k owed? I thought that was what the safe harbors were for—unforeseen income—and that as long as you paid 100% of last years tax liability you could pay the rest at tax return time