Tax Penalty on Roth Conversion

[Willyfromstlouie]

I converted funds from my IRA to Roth IRA in December 2023 and paid estimated tax on the distribution at that time (Dec 2023). I entered the 1099-R information into Turbotax Deluxe along with the taxes paid (and the correct payment date) - Turbotax is calculating a tax liability distributed throughout the year as if the 1099R was a monthly pension.  Is this correct - how do get the program to align the 1099R distribution to the tax liability payments.  When i look at Form 2210 data - it shows the increased tax liability throughout each quarter.

[dmertz · Accepted solution]

Estimated tax payments are only credited when actually paid.  However, by default, your income is treated as having been received evenly throughout the year.   When you receive a large amount of income late in the year and make the corresponding estimated tax payment late in the year, the default treatment results in underpayment of taxes for the first tax quarters of the year.  To allow the income to be treated as received when actually received instead of received evenly throughout the year., you must annualize the income on Schedule AI of Form 2210.  TurboTax will ask you if you want to annualize income.