Roth Conversion/Other fund family witholding
Taxpayer is 59 1/2+ years.
Has TIRA and Roth IRA in Mutual Fund Family #1. Roth was opened by contribution 20 years ago.
Has TIRA in Mutual Fund Family #2.
With Fund Family #1, he converts 20K from TIRA to Roth. Elects 0% withholding.
With Fund Family #2, he takes 20K distribution. Elects 50 % with holding.
Can the withholding from #2 be applied to #1 also?
The goal is to avoid an underpayment penalty.
Thank you!!
Permalink Submitted by Alan - IRA critic on Thu, 2020-09-17 21:03
Withholding is applied to the taxpayer’s total tax liability for all taxable income including Roth conversions. The known taxable income here is 40k and known withholding is 10k. Whether there is an underpayment penalty depends on what the total tax liability is for all types of income offset by witholding from all sources and estimated tax payments as well. Therefore, without knowing the total picture, it is not possible to determine if 10k is enough to cover the requirement for the amount to be paid in for 2020. But yet, the withholding from 2 can be applied to tax liability for 1 and any other tax liability as well.