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I am in the process a direct rollover of 403(b) money from my previous employer into a Rollover IRA. At some point in the near future I will be converting this Rollover IRA into a Roth IRA. In theory, it seems to make sense to do this on January 1st or later since:

(1) I had paycheck overlap this year between my previous and current employer - I was paid, and will be taxed for 13 paychecks. As such, my effective tax rate will be higher this year than it will be for next year. [I will gross about 45k this year, and it will likely be slightly less than 40k next year.]

(2) If I convert on January 1st, I will not have to pay taxes on the conversion until April 2006.

Will I be expected to pay estimated taxes on a roughly 15k conversion? If I do not, will I be hit with penalties in April 2006? If this is the case, I am better off eating the taxes right now?

Many thanks for your input!

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