I did my 401k Conversion from Traditional to Roth in Aug. Will the total amount converted become my taxable income this year and do I need pay that tax this year?

[lakshman-rg]

So, if the converted amount is $100,000 will it get added to my annual income of this year and would I need to pay taxes on the whole amount this year. Also, should I pay the entire Tax before Jan as I did the conversion in Sep?

[dmertz]

Assuming that you had no after-tax money in the 401(k), yes, the entire amount will be added to your 2023 adjusted gross income.

You might need to make an estimated tax payment by September 15, 2023 to avoid an underpayment penalty:  https://www.irs.gov/taxtopics/tc306  

[Opus 17 · Accepted solution]

Yes, the entire amount is taxable income in the year of the conversion.  

The estimated payment is due September 15, for a conversion in August.

Also, when you prepare your tax return, you may see a penalty calculation anyway.  The IRS assumes all income is spread out evenly over the year, so they expect taxes to also be paid evenly.  That means that for a $100,000 Roth conversion taxed at (let's assume) 24%, the IRS will want to see payments of $6000 each paid on April 15, June 15, Sept 15 and January 15.  To avoid a penalty for not making the earlier payments, you can use the "Annualized income installment method" which divides the year into 4 quarters, allocates the income accordingly, and calculates the tax due each quarter.  By showing the IRS that your income was unevenly received, and you paid the right amount of tax for each quarter (via a combination of payments and withholding), you will not be assessed a penalty.  Turbotax includes this calculation under "special circumstances."

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty