QCD > RMD > Roth Conversion
In tax year 2019 I took sequenced actions as indicated in the subject line. When I did the RMD portion of the sequence I had extra federal tax withheld to satisfy the planned Roth conversion taxes. Everything worked out fine and I ended up owing $162 tax which was very close to what I had expected.
This year I am thinking about the same sequencing. However, since the RMD portion is not ‘required’ for tax year 2020, I am considering converting the remaining portion of the RMD (after the QCD is done) to my Roth IRA and adding an additional conversion amount to bring my MAGI close the the IRMAA amount for tax year 2020. I believe that amount is $174,000 for this year.
Since I am not taking a RMD this year from which additional federal tax can be withheld, it appears to me my only option is to pay quarterly estimated taxes later this year. I do not want to adjust/play with federal tax withholding from our current income sources of social security and military pension. Would that quarterly estimated tax be due in the quarter that I do the Roth conversion? Is my IRMAA amount correct and is there anything else I need to consider?
Thank you in advance for any comments and information you can share with me. Tom D.
Permalink Submitted by William Tuttle on Thu, 2020-04-16 23:14
Permalink Submitted by tomd37 on Fri, 2020-04-17 02:02
In prior year 2019 the conversion amount was after the RMD was completed. For 2020 the conversion will be the remaining amount of RMD that would have been required to take out after the QCD plus an additional amount to get me close to IRMAA limit, which I believe is $174,000 this year. So if normal RMD was $50K and I do a QCD of $20K, the remaining $30K will be converted plus whatever it takes to get me to the IRMAA threshhold. Thanks for your comments thus far. Tom D.