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Estimated Tax Payments?

#1
Assume I convert $200K to a Roth IRA in January 2019.  I estimate that my total tax liability for 2019 will be $40,000 (including the converted amount).  Because my annual income will be "front-loaded" in 1Q, do I need to make an additional tax deposit in 1Q, or can I make quarterly tax deposits of $10K equally throughout the year?
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#2
Technically, you are supposed to pay tax as you earn income, i.e. you owe the tax fully in the quarter that you receive the income. However, I haven't noticed any problems with the IRS, and I do exactly the same as you. I withdraw the RMD and the Roth conversion amounts in January also. (make sure you take out any RMD before you convert, if you are over 70.5).

There is a way to treat this in TurboTax. At one point you are asked if you want to "annuitize" the income. If you say yes, you are asked to present your income on a quarterly basis. My advice; try it both ways, and select the one you like better.
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#3
Your suppose to pay each quarter whatever became taxable in that quarter. So in the first quarter, if you do the conversion you should also pay the tax on the conversion in that quarter. But the IRS also allows the following which is an exception to that rule. If you pay during 2019 timely quarterly payments that equals 110% of your total 2018 tax liability, then there is no penalty due when you pay the balanced owed by April 15, 2020

The following should still apply for income > 200k

Estimated tax safe harbor rule. If your 2016 adjusted gross income (AGI) was more than $150,000 ($75,000 if you are married filing a separate return), you must pay the smaller of 90% of your expected tax for 2017 or 110%* of the tax shown on your 2016 return to avoid an estimated tax penalty.
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#4
You can make 10K quarterly estimated tax payments. You can use the safe harbor rule to check if the payment is adequate to avoid a penalty:
2019 tax withheld + 2019 estimated tax > 100% or 110% of 2018 tax (depending on income)
If your 2019 income is more than 2018, you may owe more tax when you file your 2019 return.
If your 2019 income is less than 2018, you may get a refund.
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#5
The other response are correct. Here is another way to look at implementing it.
 
When you use Turbotax or other software to prepare your 2018 taxes in 2019, it will offer to figure out your quarterly payments. Default will be to use the safe rules.  Then print the slips, and mail them quarterly. Alternatively, schedule the payments via  https://www.eftps.com/eftps/  for fed. Most states have a site also. If you have the payments pulled from your checking, you don't risk forgetting. You don't worry about lost in the mail. Some people even send withholding by certified mail. That would be a PITA IMO.

 

Whether the conversion is taxed by the state will depend on the state. But for simplicity, it is easy to use the safe harbor for state also.
There can be alternatives to doing quarterlies by having more withholding done by your employer, SS, or whatever.
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#6
If I understand correctly, then I should be able to perform the following in a somewhat reverse scenario and be OK. 

     If I am receiving some rather large taxable distributions in December that will cause me to owe considerable more tax, then I should be able to make an estimated payment to cover them in the 4th quarter only with no consequences.  It makes sense, but you never know with the IRS.  I have been doing considerable extra withholding, but this year it appears it's not going to come close to covering my tax liability.  
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#7
(11-27-2018, 11:39 PM)Rural Wrote: If I understand correctly, then I should be able to perform the following in a somewhat reverse scenario and be OK. 

     If I am receiving some rather large taxable distributions in December that will cause me to owe considerable more tax, then I should be able to make an estimated payment to cover them in the 4th quarter only with no consequences.  It makes sense, but you never know with the IRS.  I have been doing considerable extra withholding, but this year it appears it's not going to come close to covering my tax liability.  

The estimated tax for the high December income can be paid in Q4 but you will have to fill out Form 2210 at tax time (See Annualized Income Installment Method in IRS Publication 505.)

I believe if you can pay by withholding then the form is not needed.
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#8
(11-27-2018, 11:39 PM)Rural Wrote: If I understand correctly, then I should be able to perform the following in a somewhat reverse scenario and be OK. 

     If I am receiving some rather large taxable distributions in December that will cause me to owe considerable more tax, then I should be able to make an estimated payment to cover them in the 4th quarter only with no consequences.  It makes sense, but you never know with the IRS.  I have been doing considerable extra withholding, but this year it appears it's not going to come close to covering my tax liability.  

If your current estimated tax payments (including Q4) put him in the safe harbor now, then he does not have to increase his Q4 estimated tax payment to account for the December distribution.
I am in a similar situation and that is the advice I got. I also do not have to file Form 2210 because of the safe harbor.
By safe harbor, I mean tax withheld + estimated tax > 100 or 110% of 2017 tax.
If his tax withheld + estimated tax > 90% of 2018 tax, he is also in the safe harbor. I don’t use this rule because I cannot figure out my 2018 tax now.
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