<<The conversion of an IRA to a Roth IRA could increase income enough to create a tax penalty situation. Will the government forgive penalties that are caused by the extra income due to a Roth IRA conversion in 1998? Are extra tax payments needed to cover the extra income? What if I decide to convert to a Roth IRA on December 31, 1998 and don't have enough time to send in my extra tax payment?>>At this time the law does not provide any special allowance concerning estimated tax obligations for people who roll a regular IRA to a Roth IRA, and I am not aware of any plan to change the law in this regard. As explained on my web site, most people in this situation will not incur a penalty in the year of the rollover because of the safe harbor for tax payments based on the prior year's tax liability. But if you use the four-year spread for rollovers in 1998 you may have a penalty in years 1999 through 2001 if you don't make appropriate estimated tax payments.KAT in Chicagolandwww.fairmark.comTax Guide for InvestorsNow with expanded and revised Roth IRA information
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