Roth Conversion taxes

[barbara-stefl]

I had income in quarters 1 - 3 in 2024, and taxes were paid in full.  I did a hefty Roth Conversion on December 20, 2024.  My financial advisor said taxes on this were not due until 4/15/25, so I did not do an estimated tax payment in January.  Now, TurboTax is telling me I owe a penalty, even though I did the annualized income, deductions and taxes.  Did my financial advisor give me back advice, am I doing something wrong on the 2210 form, or is there something else I need to do to avoid this penalty?  

[dmertz · Accepted solution]

If you do not meet the safe-harbor of having paid evenly enough throughout 2024 to equal 100% (110% for those with higher AGI) of your 2023 tax liability, yes, your financial advisor gave you bad information.  Annualizing income on Schedule AI for Form 2210 may eliminate the penalty for the first 3 quarters for 2024, but it won't eliminate the penalty for Q4.  Eliminating the penalty for Q4 would have required making an estimated tax payment before January 15 (or filing an paying the balance due by January 31).

[clf2]

How do I use Turbo Tax to enter revenue stream by quarters since I should not have an estimated tax penalty that the program calculated since the Roth Conversion and the Estimated tax payment for it was transacted within a few days of each other.

[dmertz]

Go to Other Tax Situations -> Additional Taxes -> Underpayment penalties and select Annualized Income Method.