Every Roth conversion comes with a tax bill, and the IRS wants it paid during the year. Pay too little by January 15 and you can owe a penalty, even if you settle up in full in April.
Most retirees have income arriving from several places at once: Social Security, dividends, interest, capital gains, maybe rent, from several different institutions. The fix I use is quarterly estimated payments, sized by a plan and adjusted as the year goes. Withholding from an IRA distribution has one trick estimated payments don't, and this fall I added a way to record it in WhenIm64. Here's how both work, and a third way out.
This is the last of three year-end articles. Start with the overview, or read about gains and losses and the last Roth conversion.
The Morrisons
The example is the couple in WhenIm64's demo. James is 66 and retired. Linda is 62 and earns $220,000 through 2028. They live in Texas, so there's no state income tax. They've converted $22,500 to a Roth so far in 2026, with $8,809 more planned for December, and made three federal estimated payments of $4,000.
Which Safe Harbor Is Easier
The last 2026 estimated payment is due January 15, 2027. Estimated payments count on the day you make them, so a big payment in January leaves the earlier quarters late. You avoid the penalty if your 2026 withholding and estimated payments add up to either:
- 100% of your 2025 tax (110% if your 2025 adjusted gross income was over $150,000), or
- 90% of your 2026 tax.
Most advice says to use last year's tax. Check both. The Morrisons' 2025 adjusted gross income was over $150,000, so last year's target is 110% of their 2025 tax. WhenIm64 puts their 2026 federal tax at about $40,300, including the December conversion. Linda's paycheck withholding covers about $23,600 and their estimates covered $12,000. That leaves about $4,700 for January 15, or about $700 just to reach 90%.
Withholding Counts as Paid All Year
The IRS treats tax withheld from an IRA distribution as if it had been paid evenly through the year, even if it was all withheld on December 20. That makes it a repair tool. If you skipped a quarter, or a December conversion raised the year's tax, a December distribution with enough withheld fixes the earlier quarters too.
- Withhold from a distribution, not from the conversion. Tax withheld from a conversion is money that never reaches the Roth, and if you're under 59½ it can be hit with the 10% penalty.
- An RMD is the natural candidate. RMDs from your own IRA start at 73, or 75 if you were born in 1960 or later. Inherited IRAs can require them at any age. No RMD? An extra IRA distribution in December, mostly withheld, works the same way.
The Morrisons don't need it. They're on track every quarter, so a January 15 payment of about $4,700 finishes the year. If they'd missed a quarter, the repair would be the IRA James inherited in 2022. It falls under the 10-year rule, so it has to be empty by 2032. He has to take at least about $4,400 this year, and WhenIm64 suggests about $13,600 so the rest comes out evenly instead of landing in one year. Taken in December with enough withheld, it would cover the missed quarter. For why the even drawdown matters, see The 2030 Inherited IRA Tax Bomb.
Or Show the IRS When the Income Arrived
If most of your income landed in December, Form 2210's annualized income method lets you show that. The tax on a December conversion is then due only with the January payment, and the earlier quarters aren't penalized. It's extra paperwork, but tax software handles it.
Side by side, here's how the three ways compare. By default, when the income arrived doesn't matter, only when the tax was paid:
| Withholding from an IRA distribution | Estimated payments | Estimated payments, annualized (Form 2210) | |
|---|---|---|---|
| When the tax counts | Evenly across all four quarters, whenever it's withheld | The day you pay | The day you pay |
| What's due each quarter | Doesn't matter | A quarter of the year's required amount | The tax on the income received so far |
| December income, tax paid by January 15 | No penalty, if withheld in December | Penalty on the earlier quarters | No penalty |
Withholding is the only way where timing never matters, which makes it the repair tool when you've fallen behind.
One catch: withholding on an IRA distribution defaults to 10%, and you can choose any rate up to 100%. Picking the right rate takes the same plan as an estimated payment. With Social Security, dividends, interest and gains arriving from several institutions, you need the year's tax, what's already been paid, and what the safe harbor requires. Fall short and the penalty still applies to the shortfall. And withholding scattered across accounts is one more number to track when you size the rest.