Reply To: Withholding from Roth Conversion, Then Replacing w/h in TIRA

Home Fairmark Forum Retirement Savings and Benefits Withholding from Roth Conversion, Then Replacing w/h in TIRA Reply To: Withholding from Roth Conversion, Then Replacing w/h in TIRA

#4997
ReachELS
Participant

Sorry to bump a 6 month old thread but I found this discussion intriguing and wanted to better understand the purpose.

Assume that I want to convert $100k of a tira to a Roth and will incur $22k of federal taxes. I could simply make a $22k estimated tax payment at the time of the conversion or…as this thread suggests, withdraw $22k from my tira, withhold 99% of it (Vanguard’s max) and pay back the $22k from other funds within 60 days.

While I can see that the rollover approach works, what advantage does this approach provide versus simply making an estimated tax payment? Does it have something to do with the $22k withholding being considered as paid equally throughout the year (even if it was not)? It does seem that you would avoid the annualized income installment test on Form 2210.

Thank you in advance,

John