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Author: mbruggeman Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: estimated tax on current yr Roth conversion Date: 3/27/2000 1:25 PM
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I'm paying estimated yaxes for yr 2000 based upon 100% of 1999 liability. I just converted a 401k to an IRA to a Roth in Feb 2000, and added it to a pre-existing Roth account from 1998. Do I increase my current yr 2000 estimated taxes to include the 2/00 Roth conversion, or can I wait til 4/15/01 to start paying tax on Roth conversion? Thanks
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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32677 of 121219
Subject: Re: estimated tax on current yr Roth conversion Date: 3/27/2000 2:00 PM
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If you are in the "safe harbor" you can use the tax money until 4/15/01 before giving Uncle his cut. If you are REALLY well compensated you might have to pay 105% of 1999 tax in your estimates, but 100% does it for most of us to avoid penalties. Best of luck, Chris

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32685 of 121219
Subject: Re: estimated tax on current yr Roth conversion Date: 3/27/2000 2:36 PM
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f you are in the "safe harbor" you can use the tax money until 4/15/01 before giving Uncle his
cut. If you are REALLY well compensated you might have to pay 105% of 1999 tax in your
estimates, but 100% does it for most of us to avoid penalties. Best of luck, Chris


Chris: That's 108.6% of 1999 taxes if your 1999 AGI is over $150K. They changed it. Ed

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Author: mbruggeman Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32692 of 121219
Subject: Re: estimated tax on current yr Roth conversion Date: 3/27/2000 3:00 PM
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So, for 2000 Roth conversion, I don't have to pay any estimated tax this year as long as my current estimated taxes are in safe harbor. And, per your article, safe harbor means I have to pay taxes equal to my 99 tax bill, which my TurboTax has already figured. (I'm under 150k AGI). Is this right?

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32705 of 121219
Subject: Re: estimated tax on current yr Roth conversion Date: 3/27/2000 4:24 PM
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Thanks for the update, Ed. I may be doing this for 2000 and will have to increase withholding to stay in the safe harbor. Yikes! 108.6% of 1999. How did they ever arrive at that figure? Regards, Chris

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Author: TMFExRO Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32737 of 121219
Subject: Re: estimated tax on current yr Roth conversion Date: 3/27/2000 9:44 PM
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<< So, for 2000 Roth conversion, I don't have to pay any estimated tax this year as long as my current estimated taxes are in safe harbor. And, per your article, safe harbor means I have to pay taxes equal to my 99 tax bill, which my TurboTax has already figured. (I'm under 150k AGI). Is this right? >>

Correct. Just so there's no ambiguity, the important amount from your 1999 1040 is line 56. Since your 1999 AGI was under $150K, as long as the line 56 amount from 1999 is paid in four equal, timely estimated tax payments for 2000, you won't owe an estimated tax penalty for 2000, no matter how much you owe when you file.

TMF ExRO
Phil Marti

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Author: TMFExRO Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32738 of 121219
Subject: Re: estimated tax on current yr Roth conversion Date: 3/27/2000 9:50 PM
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<< 108.6% of 1999. How did they ever arrive at that figure? >>

Computers.

On Capitol Hill, these provisions are called Byrd Droppings, after Sen. Byrd (D-WV), who authored a rule that says you have to pay for spending increases/revenue decreases with revenue/spending offsets.

Computers make it very easy to gin up strange numbers, such as the 108.6% safe harbor (which changes every year for some time, I believe). Playing with employment tax deposit rules is another favorite. They plug in the amount of budgeted revenue they need and the Code provision they want to jimmy, et voila!

Then they go home and campaign for tax simplification.

TMF ExRO
Phil Marti

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