Estimated taxes

Tarwheel

I was going to pay estimated taxes on a Roth conversion I did in December. I was going to pay online using the federal electronic payment system (EFTPS). I registered to create an account more than a week ago, but you can’t use the system until they send a pass code in the snail mail. It still hasn’t arrived, and the deadline is today.

Now I’m wondering if I even need to bother. My wife and I both have taxes withheld from our pensions and Social Security. We typically get a refund totaling $1,500-$3,000 each year — much higher than the estimated taxes on my Roth conversion. So do I even need to bother paying estimated taxes on the conversion?

yogibearbull

Use IRS Direct Pay.

Registration not required for paying. But it is if you want to check other personal info.

It would ask some simple questions based on a recent 1040 to make sure that it's you, so have that handy.

https://www.irs.gov/payments

InformalEconomist

Addressing just "how to pay": it's possible to use Direct Pay for estimated taxes:
https://irs.gov/payments/direct-pay
Done in 5 minutes or less.

msf

So long as withholding (plus any estimated taxes paid) cover your 2023 taxes, there's no need to do more. The source of your income (e.g. Roth conversion) doesn't matter - just that you paid in enough to cover taxes.

FWIW, I usually make payments by credit card. No registration required, and I make about 0.8% in the process. That's 2.625% cash rewards less 1.82% processing fee. One comes out ahead even with a 2% cash rewards card like Fidelity's or (ugh) Wells Fargo's.

https://www.irs.gov/payments/pay-your-taxes-by-debit-or-credit-card

Years ago, when there was only one game in town, I used EFTPS. I'm likely still registered. But there are alternatives now.

Tarwheel

Thanks, guys. I am confident that we withheld enough to more than cover the estimated taxes on the conversion, so I’m not going to worry about it.

BaluBalu

I used prior year safe harbor to figure out if I need to pay anything at all today for 2023. Likely, I have a higher tax liability in 2023, just because most of us earned a lot more interest income in 2023.

sma3

I am in same boat, but don't want to have to pay taxes until I have to, ie 4/15. I paid last years amount.

You can also mail them a check if it is postmarked today. However, the amount of penalty for missing a day or two of the deadline is pretty minimal.

EFTPS works but for some reason I had to reset my pw

msf

My tax liability fluctuates significantly from year to year. Every other year I minimize ordinary income (e.g. limit Roth conversions, use tax-free MMFs) so that I can harvest cap gains at 0% tax rate. In the off years, I minimize cap gains and increase ordinary income (e.g. increase Roth conversion amounts).

MAGI may be similar from year to year but taxes are very different.

If some cap gains are taxed at 0% and some at 15%, then every dollar added to ordinary income moves a 0% cap gains dollar into the 15% bracket. So that extra dollar of ordinary income effectively gets taxed at 22% (ordinary rate) + 15% (cap gains rate).

Similar idea to bunching deductions. Maximize deductions in a year when you're itemizing, and minimize deductions in a year when you're taking a standard deduction.

dtconroe

With my Turbo Tax preparation of taxes, I have found if I owe too much to the IRS, I am pretty much required to send an Estimated Tax amount the following year, as IRS does not want large taxable amounts due at the end of the year. I pretty much expect to be told that I need to pay some Estimated Tax amount each year to avoid the IRA wrath