How do I pay taxes on a Roth conversion?

[Finally FI]

I'm looking at doing a Roth conversion from funds in my 401k, which is with Fidelity.

I called Fidelity and was informed that they can do an in-plan conversion (to my existing Roth 401k). However, they can't withhold taxes. I would need to pay them myself, separately.

Is there a wiki or existing thread that covers specifics on how to pay estimated taxes, both federal and state?

Is the estimated tax payment process the same for Roth conversions as any other income?

 

[TheWizard]

Just send in an extra quarterly estimated payment to cover it...

 

[Midpack]

Not sure if you’re asking how to calculate estimated taxes, or how to actually pay? Maybe you’ve read the IRS instructions? You pay estimated taxes quarterly. And money (prorated if you have deductible and non-deductible) from a tax deferred account like a 401k is taxable just like ordinary income.

https://www.irs.gov/pub/irs-pdf/f1040es.pdf

 

[Sunset]

If you have an IRA, you can simply take out an additional amount and have the brokerage withhold 99% of for taxes.

 

[RunningBum]

Set up an EFTPS account
https://www.eftps.gov/eftps/

 

[TheWizard]

Set up an EFTPS account
https://www.eftps.gov/eftps/

Yes, that's what I've used in the past, to pay the extra for my Roth conversion beyond my baseline withholding...

 

[38Chevy454]

Set up an EFTPS account
https://www.eftps.gov/eftps/

Above to pay federal taxes. Then most likely your state has a similar electronic payment process to pay state taxes.

 

[Finally FI]

I just retired at the end of last year. All of my previous taxes were withheld by my employers, so I'm not familiar with any of these processes.

I haven't ever dealt with quarterly estimated payments.

I don't have a separate traditional IRA (just a Roth and after-tax brokerage account). DW does, but she isn't anywhere close to 59.5 yet, so wouldn't that involve penalties?

Thank you for the links. Is it as simple as setting up an EFTPS account and making the estimated payment?

 

[Sunset]

OP - You don't want your DW to use her IRA since she is so young... or penalties will incur of 10%.

Yes, just set up an EFTPS.

What have you been living on all year

My feeling is you are going to have a large amount of taxes due when you do your return.

 

[Badger]

The times I made a conversion to Roth IRAs I just paid them when I did my taxes. I made sure I had money set aside for the taxes. Maybe I don't understand your problem or maybe you don't have the money for the taxes. If that is the case then cash a little more to cover it.

Cheers!

 

[Sunset]

OP - You can withdraw funds from your 401K and have them withhold 99% for taxes, like they would for an IRA.

At least I can't see why not, unless of course your 401K has withdrawal restrictions.

 

[Jerry1]

The times I made a conversion to Roth IRAs I just paid them when I did my taxes. I made sure I had money set aside for the taxes. Maybe I don't understand your problem or maybe you don't have the money for the taxes. If that is the case then cash a little more to cover it.

Cheers!

You can do this, but make sure you pay in enough to be covered under the hold harmless provisions. Then you won’t get a penalty.

 

[G-Man]

Set up an EFTPS account
https://www.eftps.gov/eftps/

I remember another thread that mentioned another online method for paying quarterly taxes as well. Anyone remember what that online method was?

 

[cathy63]

I remember another thread that mentioned another online method for paying quarterly taxes as well. Anyone remember what that online method was?

Direct Pay: https://www.irs.gov/payments/direct-pay

The easy way to find all your payment options is to go to www.irs.gov and click on "Make a payment".

 

[USGrant1962]

I remember another thread that mentioned another online method for paying quarterly taxes as well. Anyone remember what that online method was?

IRS Direct Pay. https://www.irs.gov/payments/direct-pay

That is how I pay my quarterlies. I'm not interested in automated withdrawals, which I understand EFTPS allows.

 

[orbops]

Remember to pay both the Federal and State estimated taxes.

 

[Sunset]

IRS Direct Pay. https://www.irs.gov/payments/direct-pay

That is how I pay my quarterlies. I'm not interested in automated withdrawals, which I understand EFTPS allows.

I used to use the direct pay method only.

This year I'm trying the EFTPS way.

Both are useful.

 

[Finally FI]

Thank you. The information you've shared is exactly what I was looking for.

• I set up an account on IRS.gov and see the payment options.
• I found my state's department of revenue site and set up an account, which enables payment of estimated taxes.
• I went into my 401k and clicked through the first few steps of a withdrawal, which showed me extra tax withholding options for both federal and state. I'm also not 59.5 yet, but was over 55 when I retired so "the rule of 55" applies if I want to use that option.

My next step is to figure out how much we're going to convert and then calculate estimated taxes. I'll start with form 1040-ES that was linked.