When to Pay the Taxes from a Roth Conversion

[Kipmc7]

Do I have to pay the taxes on a ROTH conversion as soon as I make the conversion?

I plan on doing a conversion that year of approximately $80,000.

If I did not do the conversion I would have expected to be getting a tax refund this year. That is because I would have broken even. Instead I will have a $7300 federal tax credit for installing solar panels.

I'm planning to convert enough to take me to the top of the 24% bracket. That will be a taxable income of $182,100. The conversion amount will be approximately  $80,000.  I plan on converting $40,000 now (in September) and the rest closer to December 31st.

The tax on $40,000 @ 24% is $9600. But with the $7300 credit I would only owe around $2300. Should I pay that now as an Estimated payment?  What would happen If I did not pay that amount now and waited until I filed my taxes to pay the full balance?  

[fanfare]

When to pay — Estimated tax payments are due four times a year:

April 15 for payment period January 1–March 31
June 15 for payment period April 1–May 31
September 15 for payment period June 1–August 31
January 15 for payment period September 1–December 31

@Kipmc7 

[NCperson]

@Kipmc7 to avoid interest penalties you have to either pay 110% of last year's liability or 90% of this year's liaiblity.  Given some of the complexities of lumpy income (which the Roth conversions can create), the only way of really knowing is completing Form 2210, which is a doozy.

Best  to simply pay the estimate by January 15. (The Sept 15 payment deadline is for income through August only).

https://directpay.irs.gov/directpay/payment?execution=e1s1

Since you are taking the income to the top of the 24% tax bracket, that means your AGI should be $195,950.

If you are not aware and are receiving Medicare, your income will cause a one year increase in your Medicare premiums in 2025 for something called IRMAA.  So the $164.90 monthly premium would be approx $428 per month for that one year only. 

If your AGI exceeds $199,000 for 2023 (using an estimated 3% inflation rate), the IRMAA premium would jump to appprox. $528 per month during 2025, so you may want to reduce the Roth conversion by a few dollars to ensure you are below this thresshold.  Even going over the thresshold by $1.00 will increase your IRMAA premiums to the nexst tranche.  Read the link below. 

if you won't be on Medicare in 2025, then don't worry about this. 

https://thefinancebuff.com/medicare-irmaa-income-brackets.html