Money Investing megathread extravaganza - Page 892

**DaFace** · 06:35 PM

A place to talk about investing stuff.

**Buehler445** · 03-17-2023, 08:28 AM

Quote:

Originally Posted by petegz28

Man up! Roll this shit over and prepare to pay your taxes out of a taxable account when you file. WTF would you mess with filing an estimate when in the end you're going to pay whatever it is you have to pay and you have until then to pay it?

Because you'll pay a penalty.

**petegz28** · 03-17-2023, 08:30 AM

Quote:

Originally Posted by Buehler445

Because you'll pay a penalty.

Why would he pay a penalty?

**Buehler445** · 03-17-2023, 08:35 AM

Quote:

Originally Posted by petegz28

Why would he pay a penalty?

Underpayment Penalties exist.

https://www.investopedia.com/terms/u...ets%20annually.

**petegz28** · 03-17-2023, 08:37 AM

Quote:

Originally Posted by Buehler445

Underpayment Penalties exist.

https://www.investopedia.com/terms/u...ets%20annually.

If he does a rollover today he has 60 days to put it into a Roth and he has until April 15th, 2024 to pay the taxes on it.

What am I missing?

**Buehler445** · 03-17-2023, 08:39 AM

Quote:

Originally Posted by petegz28

If he does a rollover today he has 60 days to put it into a Roth and he has until April 15th, 2024 to pay the taxes on it.

What am I missing?

It won't be a penalty for pulling out of a 401K. The income will be taxable with no withholding against it. Accordingly, he will potentially have exposure to an underpayment penalty.

**petegz28** · 03-17-2023, 08:42 AM

Quote:

Originally Posted by Buehler445

It won't be a penalty for pulling out of a 401K. The income will be taxable with no withholding against it. Accordingly, he will potentially have exposure to an underpayment penalty.

Follow me here....

Rolls over to Roth

Claims on tax returns

Tax return says you now owe $X

Pays tax bill for $X

Paying estimated taxes is just that, estimated. At the end of the day you have until April 15th of whatever year to true up what you owe or don't owe.

So why not leave the money he is going to pay the tax bill with in an account earning 4% for the year and then pay when he has too?

No one is going to come knocking on his door for any tax payment until April 16th, 2024.

Jenson71 · 03-17-2023, 08:46 AM

Quote:

Originally Posted by petegz28

Follow me here....

Rolls over to Roth

Claims on tax returns

Tax return says you now owe $X

Pays tax bill for $X

Paying estimated taxes is just that, estimated. At the end of the day you have until April 15th of whatever year to true up what you owe or don't owe.

So why not leave the money he is going to pay the tax bill with in an account earning 4% for the year and then pay when he has too?

No one is going to come knocking on his door for any tax payment until April 16th, 2024.

Buehler's right -- if the tax return says you now owe $X, and you have not paid 90% (I think that's it, in general) of $X by end of that tax year, you owe an underpayment penalty. If we didn't have that rule, then most people wouldn't want to withhold anything from their paychecks and all our self-employed people would wait to the last second to pay their taxes, thus depriving the IRS of what's rightfully theirs for nearly a year. (

)

**petegz28** · 03-17-2023, 08:49 AM

Quote:

Originally Posted by Jenson71

Buehler's right -- if the tax return says you now owe $X, and you have not paid 90% (I think that's it, in general) of $X by end of that tax year, you owe an underpayment penalty.

I am not sure I agree with that. My Wife does IRA administration, I will hit her up on that but as far as I know, you have 60 days to get the money rolled over and any tax you owe can get paid when you file your taxes. Just like any other time your tax return says you owe. Maybe it's this 90% thing you are talking about....

Jenson71 · 03-17-2023, 08:55 AM

Quote:

Originally Posted by petegz28

I am not sure I agree with that. My Wife does IRA administration, I will hit her up on that but as far as I know, you have 60 days to get the money rolled over and any tax you owe can get paid when you file your taxes. Just like any other time your tax return says you owe. Maybe it's this 90% thing you are talking about....

Yes, they are two separate concerns. One is, 'I don't legally need to withhold taxes from the converted IRA.' The second concern is, 'but maybe I want to do something to avoid the underpayment penalty focusing on ALL of my income at the end of my tax year, so let me throw in an estimated tax payment to be safe'

ChiefsFan63 · 03-17-2023, 12:30 PM

Quote:

Originally Posted by petegz28

I am not sure I agree with that. My Wife does IRA administration, I will hit her up on that but as far as I know, you have 60 days to get the money rolled over and any tax you owe can get paid when you file your taxes. Just like any other time your tax return says you owe. Maybe it's this 90% thing you are talking about....

One exemption to paying penalties is that if you have paid at least your tax liability from last year. If your total tax liability from last year was $5k, for instance, as long as you had paid $5k withholding this year there would be no penalty for under withholding. I use this exemption often if I have unexpected income or capital gains.

**Buehler445** · 03-18-2023, 07:38 AM

Quote:

Originally Posted by petegz28

I am not sure I agree with that. My Wife does IRA administration, I will hit her up on that but as far as I know, you have 60 days to get the money rolled over and any tax you owe can get paid when you file your taxes. Just like any other time your tax return says you owe. Maybe it's this 90% thing you are talking about....

Dude.

It has nothing to do with the IRA. The IRA Conversion just creates income. Forget the IRA.

If you're single, but you mark down you're married and have 400 kids on your W-4 and you don't withhold enough, there will be an underpayment penalty.

I did a return that had a guy that got a bunch of ESPP stock that he sold, with the runup he had a pretty big gain. Him and his Wife both had W-2 earnings, with withholdings, but he was underwithheld because the stock sale had no withholdings. So he had an underpayment penalty.

But if you have a bunch of income that doesn't have withholding against it, you either need to make an estimate or pay an underpayment tax.

Seriously. Read the link I posted.

**lewdog** · 03-21-2023, 07:26 AM

Quote:

Originally Posted by Buehler445

Dude.

It has nothing to do with the IRA. The IRA Conversion just creates income. Forget the IRA.

If you're single, but you mark down you're married and have 400 kids on your W-4 and you don't withhold enough, there will be an underpayment penalty.

I did a return that had a guy that got a bunch of ESPP stock that he sold, with the runup he had a pretty big gain. Him and his Wife both had W-2 earnings, with withholdings, but he was underwithheld because the stock sale had no withholdings. So he had an underpayment penalty.

But if you have a bunch of income that doesn't have withholding against it, you either need to make an estimate or pay an underpayment tax.

Seriously. Read the link I posted.

So if I do this conversion but increase my withholdings for the rest of the year, can I avoid paying estimated taxes that way?

**Rain Man** · 03-21-2023, 08:35 AM

Quote:

Originally Posted by lewdog

So if I do this conversion but increase my withholdings for the rest of the year, can I avoid paying estimated taxes that way?

Yep.

scho63 · 03-21-2023, 01:31 PM

Quote:

Originally Posted by lewdog

I'm thinking of doing a ROTH conversion in my wife's IRA account. It's roughly $20k so I'd have to pay taxes on it. Still seems worth it right and would I have to pay estimated taxes on that or can I just roll it into next year's taxes?

I think they changed the rules back in 2017 going FROM a Roth IRA.

Better check with accountant.

**Buehler445** · 03-21-2023, 03:43 PM

Quote:

Originally Posted by lewdog

So if I do this conversion but increase my withholdings for the rest of the year, can I avoid paying estimated taxes that way?

Should.

06-27-2016, 11:23 AM
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