Estimated Tax Penalty exceptions

rbtax2015 — Wed, 26 Jul 2023 16:13:50 GMT

Hello, Just to double check on this, If I owed zero tax in 2022 and I do a Roth Conversion in 2023 of 50k, there will be no federal estimated tax penalty when doing my 2023 taxes even without making any estimated tax payments. Is this correct?

Thank you!

Re: Estimated Tax Penalty exceptions

juliob — Wed, 26 Jul 2023 16:32:05 GMT

Aloha rbtax2015,

ROTH conversions are a great way to convert your hard earned retirement to tax free income and avoid any federal, even state, income taxes when it comes time to cash in.

As for your federal estimated tax penalty question, if you either:

Owe less than $1,000 at tax time;
You pay 90% of your total tax that you owe in 2023; or
You expect to have enough tax withholding (at least 100 percent of your previous tax year's return, or 110% percent of your prior year taxes if your AGI is over $150,000)

then you will not be subject to an underpayment penalty.

Please click on the following link to learn more on federal estimated tax payments:

Estimated Taxes: How to Determine What to Pay and When

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Estimated Tax Penalty exceptions

Re: Estimated Tax Penalty exceptions