15 Feb When are taxes due on a 2021 Roth IRA conversion?

Q. If you convert from a traditional IRA to a Roth IRA in February 2021 and have not paid your 2020 taxes at that time, what year are taxes due on the conversion?
— Investor

A. It’s a great question.

A conversion of a traditional IRA to a Roth IRA in February 2021 results in taxable income for 2021, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

“Where you stand as far as your 2020 personal income taxes has no bearing on this,” he said.

Your 2021 personal income tax returns are due April 15, 2022, with any balance owed for 2021 due by that date, Becourtney said.

There are thresholds to be met as far as avoiding an underpayment penalty, he said.

“For federal purposes, one must generally pay the lesser of 90% of their 2021 tax or 100% of their 2020 tax — generally 110% if 2020 gross income exceeds $150,000,” he said. “For New Jersey, one must generally pay the lesser of 80% of their 2021 tax or 100% of their 2020 tax to avoid being penalized.”

Payments can be a combination of withholding and quarterly estimated tax payments, he said.

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This story was originally published on Feb. 16, 2021.

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