Quote:
Originally Posted by opinionist
It is not complicated. The amount you move into the Roth IRA is added to your annual taxable income. You alone can determine what tax burden you can tolerate.
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Managing the estimated tax due is a bit complicated. I feel it's to my advantage to make the conversion in December, so I can keep the money I will use to pay the taxes in my possession as long as possible. There are some forms you have to fill out, and fill out correctly, in order to avoid the penalty consequences of not having made the estimated tax payments quarterly, as you would if your income was steady throughout the year.
From what I can glean reading the IRS instructions, you can pay your estimated taxes as you receive the income, but you have to report it a certain way. I think I understand it, but I'm not sure I understand it. Especially for the first year doing this, I think having a tax pro guide me through it might be money well spent.
Also, it's not just about how it affects your taxable income, you have to be aware of how it affects your IRRMA thresholds.