Withholding Taxes on Roth Conversion

Submitted by Patrick Min on Tue, 2020-03-31 23:59

Does withholding taxes on a Roth conversion pre 59 1/2 trigger a premature distribution and 10% penalty on the tax withheld?



Submitted by Alan - IRA critic on Wed, 2020-04-01 00:48

Technically, yes. But occasionally, an IRA custodian will just issue a single 1099R coded 2, instead issuing a separate 1099R for the withholding amount coded 1. 



Submitted by Brad Kerr on Fri, 2020-04-03 17:40

I was planning on doing a coversion from my IRA to Roth at the end of 2020.  I am not thinking about doing that now.  I don’t want to get a penalty at the end of the year.  How do you pay the tax now on the $50K conversion?



Submitted by THOMAS WNUK on Wed, 2020-04-01 04:29

  



Submitted by William Tuttle on Fri, 2020-04-03 22:21

  1. Standard safe harbors apply for late year taxable income 9/1/20 – 12/31/20.
  2. If your 2020 income tax withholding/estimated taxes are greater than 100% (110% AGI > $150K) of your 2019 tax liability. No penalty would apply if you paid the amount in full by your tax filing deadline 04/15/21.
  3. If your withholding alone does not meet the above safe harbor, you would only need to make an estimated tax payment of the difference by 1/15/21 to bring your tax withholding/estimated tax payments to meet the safe harbor described in 2.


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