Avoiding Penalty After A Roth Conversion Late In 2019

Forum|Forum|6 years ago
September 10, 2019
2 replies
44 views

My wife has a Traditional IRA that we want to convert to a Roth IRA before the end of calendar year 2019. Obviously, we will not be able to submit quarterly income tax payments to the IRS for calendar year 2019 because there are only 2 quarterly payment dates remaining. Is there a way that we can avoid an Income Tax Penalty for our income tax for 2019 due to this Roth IRA Conversion? If we have 10% withheld for the conversion (like we do for our annual RMD), that will be an amount a little over our Total Tax Owed for 2018 (Safe Harbor Rule). Any suggestions on how to avoid a penalty for this Roth Conversion? Thank you.

VolvoGirl

Level 15

Why can't you send in an extra payment? You can pay anytime directly at https://www.irs.gov/payments

But anyway if Turbo Tax calculates an underpayment penalty next year you can probably eliminate it (or reduce it) by filling out form 2210 and putting down when you received your income.

Here, look at 2210 https://www.irs.gov/pub/irs-pdf/f2210.pdf

and instructions https://www.irs.gov/pub/irs-pdf/i2210.pdf

VolvoGirl

Level 15

If you want to use your current 2018 return to estimate the quarterly payments you can put down $1 for the 1st & 2nd quarters so it will only calculate the 3rd and 4th quarter.

Go to
Federal Taxes or Personal (Self Employed or H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

Say No to W4. When you get to the W4 and Estimated Taxes section, say you want to adjust your income to go though all the screens.

bainnoah

Level 2

I had a traditional IRA that I converted to a Roth IRA in 2019 Obviously I will not be able to submit a quarterly income tax payment. I owe a $550 penalty. Is there anyway to avoid this penalty

VolvoGirl

Level 15

There should not be a penalty on a conversion. You might have some extra tax due on it. What code is in box 7? Did you select you moved it to a ROTH? @dmertz

dmertz

Level 15

The penalty is apparently a tax underpayment penalty. The only way to potentially reduce the penalty is to annualize income on TurboTax's 2210AI form. This would probably only help if the conversion occurred later in the year.