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How to use my desktop 2024 TurboTax Deluxe to file estimated taxes for 2025 traditional to Roth IRA conversion?

I have been a TurboTax Advantage member since 1999.  How do I use TurboTax to determine (and file) estimated tax now due for a 2025 conversion from traditional to Roth IRA? I need to pay estimated taxes on a $383,970.46 rollover done now, in 2025.

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4 Replies

How to use my desktop 2024 TurboTax Deluxe to file estimated taxes for 2025 traditional to Roth IRA conversion?

You don’t pay tax through TurboTax but you pay it directly to the IRS and your state if it has income tax. 

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

 

The income from your conversion is taxed at your marginal tax rate taking into account that your conversion might have pushed you into a higher tax bracket. 

How to use my desktop 2024 TurboTax Deluxe to file estimated taxes for 2025 traditional to Roth IRA conversion?

If your 2025 income is going to be higher than 2024 due to the conversion you may be able to pay estimated tax based off 2024 instead.  To avoid underpayment penalty you need to pay the smaller of 100% of your 2024 tax (110% if AGI > 150k), or 90% of your 2025 tax.  Since 2024 is all known you don't need to calculate anything, also TT would have used this method to produce estimated tax vouchers during your 2024 return by default.    If you pay ES based on 2024, it doesn't matter the amount or timing of your 2025 income and the balance is due when you file in 2025.

 

The rub is that by default, the estimated tax needs to paid evenly and quarterly, so if you didn't pay this in Q1 there would be an underpayment penalty for a quarter of the ES but only for 3 months if you pay 50% of the ES in Q2.  But you can then earn interest on the rest of the ES until 25% due in each of Q3 and Q4 which may offset the penalty amount if you use quarterly payments.

 

Alternatively to avoid any underpayment penalty for Q1 at this point due to uneven ES payments, you would need to adopt the Annualized Income method when you file in 2025 which would require paying all the estimated tax in Q2 (I'm assuming when you say "now" you mean the Roth conversion occurred in Q2) to line up with the income.  This can be a lot of additional work when you file as you need to calculate AGI etc for 3/31, 5/31, 8/31 (and probably go thru same process for state); whether this is worthwhile depends on the amount of penalty you are trying to eliminate.

 

In terms of determining the 2025 tax due, few options - (1) under Other Tax Situations / "Form W4 and Estimated Taxes" you can provide information on 2025 income and TT will make a determination of your estimated tax based on 90% of 2025 if that happens to be smaller than 100/110% of 2024.  (2) make a draft return in TT 2024 [I use desktop, not sure if you can do this with online], allowing for the fact that TT 2024 may not have updated deduction limits etc and tax tables but you can get close and do final tax table calculations manually if needed.

 

For paying ES just pay directly at irs.gov, you don't need to mail checks with vouchers just make payment designated as ES for the correct tax year and that is your filing.  Your state likely has equivalent online payment portal.  Generally I avoid paying thru TT or giving direct debit instructions on my return, just pay directly online and you fully control it (Fed will generally debit your account within 1 business day of initiating electronic payment, state may take a little longer, either way make sure then money is in your account when you initiate the payment).

 

Further info on ES here

https://www.irs.gov/faqs/estimated-tax

 

Further info on Form 2210 penalty calcs/annualized income here

https://www.irs.gov/forms-pubs/about-form-2210

 

 

Not a CPA just my 2 cents from what you described, hope this helps.

How to use my desktop 2024 TurboTax Deluxe to file estimated taxes for 2025 traditional to Roth IRA conversion?

typo "If you pay ES based on 2024, it doesn't matter the amount or timing of your 2025 income and the balance is due when you file in 2026."

How to use my desktop 2024 TurboTax Deluxe to file estimated taxes for 2025 traditional to Roth IRA conversion?

to estimate your tax, enter your 2025 expected income, including any conversions, as 2024 income into a separate tax return file.

It will be close enough to understand the effects.

For further accuracy, for example, you can override the 2024 standard deduction with the announced 2025 standard deduction.

 

@pjberens 

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