[Bill14564]

Originally Posted by retiredguy123

I don't have a specific link, but I always pay my annual income tax on April 15 for the prior year. I never have any money withheld during the year for my pension, dividends, or RMDs. All of my taxes are paid quarterly as estimated payments. As I understand it, as long as you follow the prior tax year rule, which is usually based on 25 percent per quarter of the total tax paid in the prior year, you will never owe a penalty, even if your income greatly exceeds the prior year income. Recently, I took my RMD and paid no withholding tax on it. There are some sources of income that may require a tax withholding, such as a gambling or lottery winning, but money withdrawn from a tax deferred account for an RMD, pension income, or SS income are not subject to mandatory withholding. So, compliance with the IRS estimated tax rule will avoid a penalty, and allow you to pay any additional taxes due on April 15. I use TurboTax and they calculate my estimated payments for the next year as well as my taxes due for the current year. These estimated payments are due on April 15, June 15, September 15, and January 15, and they must be paid on time. I don't know if there is a special rule for a Roth conversion, but I doubt it.

Note that I did some Googling, and it looks like a Roth conversion just adds ordinary income to the current year's taxable income, with no requirement to pay the tax earlier than the normal April 15 tax date. Fidelity says:

Time of year
Converting earlier in the year gives you more time to pay taxes, but converting later in the year allows you to start the 5-year rule as of the beginning of the year.

While I agree with all the above (and it took me a while to get to that place) I'm not yet sure whether you need to pay estimated taxes based on 100% of your payment for last year or if you need to base it on 110% when your AGI is above a certain level. I use 110% just to be safe but that *might* not be necessary.