This year TurboTax says I owe a penalty tax? For converting from traditional to Roth IRA. My magi is about $182k.

[stevebergstrand73]

4th year I have converted a part of my traditional to my Roth within the same financial company.

[VolvoGirl]

A underpayment penalty on 1040 line 38 or for converting too much?  Don't enter it again under Deductions and Contributions.   Did you have any tax withholding taken out or send in an estimated payment?  

If you get a penalty on 1040 line 38, you might be able to eliminate it or at least reduce it. You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you. It's form 2210.

How to add form 2210 for Underpayment Penalty
https://ttlc.intuit.com/community/tax-payments/help/how-do-i-add-form-2210/00/25703

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

[Opus 17]

When did you do the conversion and how/when did you pay any estimated taxes?

In general, taxes are supposed to be paid evenly over the year.  If you did a conversion of (let's say) $40,000 and your taxes are estimated to be $10,000, you would be expected to pay quarterly payments of $2500 by April 15, 2024, June 15, September 15, and January 15,, 2025.  These deadlines apply even if you did the conversion at the end of the year.  So you can be considered to be "under-paid" or "under-withheld" if you did not make the estimated payments, even if you are prepared to pay in full when you file.

With a late conversion, you need to make the estimated payment, and then you need to file form 2210 using the "annualized penalty method" to show the IRS that even though your payments were not even over the year, each quarterly payment was appropriate for that quarter's income.  

[stevebergstrand73]

Thank you for your help and reply.

I paid 5% state and 15% federal taxes on the traditional Ira dollars at the time of the conversion in May after meeting my RMD requirements for the year.  I wanted to net about $26000 added to the Roth so the gross amount was about $33722 and $6718 in taxes paid in May 2024.

so I don’t understand the Roth IRA penalty.

[stevebergstrand73]

Thanks for your reply and help.  I had 15% federal taxes withheld at the time of the traditional IRA conversion to my Roth in May of 2024. The amount of the conversion was about $33,722 and the federal withholding was $5058.

I also paid $1000 Estimated payments in April and in $1000 in June.

? So I don’t understand the penalty of 6% on the Roth conversion amount of about $26,000.

Thank You!

[VolvoGirl · Accepted solution]

Sounds like you also entered it as a contribution?  Don’t enter it under contributions.  Only enter it from the 1099R, nowhere else.  It is not a new contribution.  Delete it from there.  

[stevebergstrand73]

Thank you for your help! That was what I entered incorrectly.  Lesson learned!