Paid estimated tax on mid-Jan 2026 converted IRA to ROTH and beyond, am I doing this right?

[howjltx]

Does all the following sound correct?
In mid-January 2026, I “converted IRA to ROTH (cIRA2ROTH)” in the amount of $330k paying $80k in estimated tax.

• Note all my IRAs are converted from 401ks and not considered traditional IRAs.
• There are no after-tax contributions within my IRAs, only in my ROTHs.

I will file Married filing Jointly (MFJ), where I am not labeled an HCE for this year, but was last year for 2025.
As of my mid-January’s cIRA2ROTH, I know my final tax bracket will be 32%, if I do no more cIRA2ROTHs.
Projecting my 2026 W4 withholdings plus the $80k estimated tax, this will be at least 101% of my 2026 total tax bill.

• Therefore the 90% is Safe Harbor rule for 2026 will protect me from penalty, even if I do additional cIRA2ROTHs before the end of this year.
• It was also recommended I calculate my maximum estimated tax rate for 2026 then divide this by 4, making four Quarterly payments of this amount (a little tricky since I need to consider Qtrly W2 withholdings, but doable).
• Provided I pay the estimated tax at the same time of the next cIRA2ROTH at my final estimated tax rate.
  • using Form 2210 Schedule AI as a guideline
  • where I can’t rely on the various MFJ tax brackets levels like I did for the mid-Jan cIRA2ROTH, must do this at my final tax rates
  • will get penalized after the fact (post-15Apr2027) for underpayments the whole year.

My main concern is I have made some bad assumptions above where in mid-Jan I needed to pay a higher estimated tax than the 25% I did on the $330K (this was due to the MFJ Tax Bracketing) where all year I will be considered making underpayments (Form2210 AI)

[MindyB]

Yes, your understanding of the Roth conversion process is largely accurate, but there are a few technical nuances regarding IRS definitions and "Safe Harbor" protections that could impact your penalty exposure. First, it is important to clarify that because your IRAs originated from 401(k) rollovers and contain no after-tax contributions, they are technically Traditional IRAs in the eyes of the IRS. The lack of after-tax basis is actually a benefit for you, as it means the Pro-Rata Rule will not complicate your math.

Regarding your "Safe Harbor" strategy, you mentioned the 90% rule, but for high-income earners, which you likely are, given your previous Highly Compensated Employee (HCE) status, there is a different rule. If your Adjusted Gross Income (AGI) exceeds $150,000 (Married Filing Jointly), the IRS requires you to pay 110% of your previous year’s (2025) total tax liability to be fully protected from underpayment penalties. If your current $80,000 estimated payment plus your 2026 W-2 withholdings already exceed 110% of what you owed in 2025, you are in the "Safe Harbor." This means you could perform additional conversions later this year without triggering a penalty, even if you end up owing a large balance on April 15, 2027.

The concern you have about your mid-January payment being "too low" ($80k on a $330k conversion) relates to how the IRS views the timing of income. By default, the IRS assumes income is earned evenly throughout the year. If you use Form 2210 Schedule AI (Annualized Income Installment Method), you are essentially "opting out" of that assumption to prove that your tax payments aligned with when you actually received the money. However, since you did this large conversion in Quarter 1 (mid-January), that income is front-loaded for the year. If your $80,000 payment plus Q1 W-2 withholding doesn't cover the actual tax due on that $330k at your effective rate, you could technically face a Q1 underpayment penalty unless you meet the "110% of prior year" rule mentioned above.

Moving forward, your plan to calculate a maximum estimated tax rate and divide it by four is a safe, conservative approach, but it may be overkill if you hit the 110% Safe Harbor early. If you rely on the 90% rule instead, you must be careful: if you perform additional conversions later in 2026, your "total tax bill" increases, which in turn raises the dollar amount required to satisfy that 90% threshold. To avoid the stress of "chasing" a moving target, the most robust strategy is to ensure your total 2026 prepayments (withholding + estimated payments) equal at least 110% of your 2025 total tax (found on Form 1040, line 24). Once that number is paid in, the timing and size of any further 2026 Roth conversions become irrelevant to the penalty calculation.

[baldietax]

The rub seems to be you're not certain if you are going to do another Roth conversion later in the year which would require the AI method unless you come up with a plan to use quarterly payments.

Assuming no more Roth conversions, if you have a big income event early in the year you don't need to use the AI method, you can take advantage of the IRS assuming your income is even and just pay quarterly ES rather than a lump sum in January i.e. if your 80k met 101% of your expected 2026 tax and you didn't need to do anything else then you could have paid that as 20k/quarter.  Since you paid the 80k in Q1 that's fine too to overpay in earlier quarters from penalty perspective, just some lost interest (you also didn't need to pay it in January it is due 4/15 for Q1).

The other option especially if you plan more Roth conversions is to use the safe harbor based on prior year tax (100% or 110% depending AGI) which is a fixed quarterly amount (assuming no changes in your withholding); then it doesn't matter when or how much Roth conversions you do.  Again since you already paid 80k that would roll forward into whatever those quarterly ES payments would be and you just need to top it up in Q2/3/4 if needed to meet the safe harbor amount without needing 2210AI.  This method is the default used by Turbotax to generate 2026 ES vouchers when you file for 2025.

I seem to remember a similar post where you said you had similar Roth conversions last year.   If this 80k plus withholding is enough to cover 100% of your tax this year and last year (say), and your AGI was > 150k last year so you need to cover 110% then call it 90k, and your "worst case" quarterly payments would be 22.5k/quarter.  Since you already paid 80k you are covered for Q1-3 and just need to pay the remaining 10k in this example in Q4 by 1/15/27 to avoid any penalty regardless of what else you do with your Roth.  You can see all this laid out on Form 2210.

Hopefully you're using TT desktop (if not switch for this reason...).  Suggest doing a mock 2026 return using the 2025 software and set up the ES and Form 2210 with or without AI method to see how it behaves and then you can model different scenarios and get comfortable that you don't have a penalty situation.  (It won't be quite the right tax bracketing or deductions for 2026 but you can also adjust for those if needed, it's probably a minor difference relative to the tax problem you are trying to solve).   In forms mode you can see your Form 2210 even if not in the default forms list, by double clicking through line 38 on Form 1040 and the worksheet, or do Open Form and search for 2210.

Not a CPA but hope this helps think through some options.

[howjltx]

I have no after-tax, since in previous years, during my 401ks moved to a single account (IRA rollover}, I separated these amounts out of the IRA during the rollover process. 

My 2025 tax bill is much, much higher than my 2026 tax bill, I cannot do the 110% of 2025.

So, am I incorrect in thinking I can pay the 110% of 2026 tax for the safe harbor? Although, it sounds like I need to go ahead and calculate the tax at that next level and divide by four then ensure each quarter I pay at least that 1/4 amount (although will likely not need to pay anything in the 2nd qtr. and I do not have to use the 110% amount)

In the near future I will calculate how much less tax I will pay if I convert the remaining IRA balance over 3-4 years with 2028-on keeping my total income under the IRMAA penalty level for when I start Medicare in 2030.

[baldietax · Accepted solution]

the 110% applies to prior year tax... you need to have paid the smaller of 110% of 2025 tax or 90% of 2026 tax.  see Form 2210 instructions to see how the IRS describes it and the penalty calcs on Lines 1-9.

yes I think if prior year tax was very high and not advantageous, then you just need to keep track of how much is 90% of 2026 projected tax, less withholding, divide by 4 - that is the quarterly ES payment you need to meet to avoid penalty.  The upside of the very large Q1 payment you already made gives you good protection from underpayment in the earlier quarters which usually accounts for bulk of any penalty, and flexibility if the quarterly ES requirement increases due to other unplanned income; you can probably just top up ES payment for later quarters and hopefully you won't need the AI method (extra filing work).

[howjltx]

Yes, your response is in the direction I am headed. I agree last year's tax was very high but realize it was also very advantageous: I am very proficient at using Excel spreadsheets and projected out what taxes I would pay if I lived both to 85 and 90 years old (my family has a history of living this long). If I did nothing but keep taking tax breaks within my 401k, once RMD kicks in in about 7 years, I see I would pay $1 million dollars more in Income tax than with my current strategy which will costs me $250k in taxes last year, this year and next year. It's actually a no brainer if you project out your taxes. Also, I will have no IRMAA and will keep my total retirement income $20k below the 0% LTCG threshold so I can play with 0% LTCG investments in retirement and not pay any capital gains on the investments. One final benefit is my airs will not have to worry about taxes on their inheritance. Although I am plotting how much I can spend before they get it.......