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Started By
Message
Help With Potential Tax on Roth Conversion
Posted on 6/2/15 at 4:30 pm
Posted on 6/2/15 at 4:30 pm
I hope someone who is smarter than I am on the tax code can give me a ballpark figure on how much I will owe at tax time with the following figures assuming it remains steady state. I am consolidating my wife's 401k's into a Traditional IRA, but I would like to convert it into a ROTH, how much am I looking money wise at tax time? The following numbers are coming from my pay stub for the month of May:
FICA:
Wage Period-5219.40
Soc Wage YTD-26097.00
Soc Tax YTD-1618.00
Med Wage YTD-26097.00
Med Tax YTD-378.40
FED:
Wage Period-4363.52
Wage YTD-21817.60
In case you also need to know the monthly totals:
Fed-420.13
FICA-SS-323.60
FICA-Med-75.68
TSP-1043.88
Mid-month pay-1846.81
End of month pay-1874.40
TSP YTD Deductions-5219.40
TSP YTD Deferred-5219.40
I am claming Married with 1 exemption on my W4. We combined 3 401k accounts into a direct rollover IRA totaling 34317.44. How much additional am I looking to pay at tax time? Thank you
FICA:
Wage Period-5219.40
Soc Wage YTD-26097.00
Soc Tax YTD-1618.00
Med Wage YTD-26097.00
Med Tax YTD-378.40
FED:
Wage Period-4363.52
Wage YTD-21817.60
In case you also need to know the monthly totals:
Fed-420.13
FICA-SS-323.60
FICA-Med-75.68
TSP-1043.88
Mid-month pay-1846.81
End of month pay-1874.40
TSP YTD Deductions-5219.40
TSP YTD Deferred-5219.40
I am claming Married with 1 exemption on my W4. We combined 3 401k accounts into a direct rollover IRA totaling 34317.44. How much additional am I looking to pay at tax time? Thank you
2
Posted on 6/2/15 at 5:25 pm to OleWarSkuleAlum
I'm pretty sure it's just your joint top tax bracket times total conversion. Does your wife have income? Figure out your combined yearly income. Find your top tax bracket from these charts. Multiply that % by your total converting.
e.g. 34k*25%=8.5k
Edit: Also same with state income taxes.
e.g. 34k*25%=8.5k
Edit: Also same with state income taxes.
This post was edited on 6/2/15 at 5:29 pm
Posted on 6/2/15 at 6:27 pm to jturn17
quote:
Does your wife have income?
She will not for this year.
quote:
I'm pretty sure it's just your joint top tax bracket times total conversion.
I thought it was a sliding scale where you are taxed at different rates on the way up to the top bracket?
Posted on 6/2/15 at 6:29 pm to jturn17
quote:
Multiply that % by your total converting.
What I'm really looking for is the shortfall if I continue to pay my taxes on my currently scheduled rate if I do the conversion. I'm not sure how to find that figure.
Also no state taxes as a TX resident.
Posted on 6/2/15 at 6:56 pm to OleWarSkuleAlum
There's not enough info in your OP to calculate. Do you expect your overall income and deductions to be the same from 2014 to 2015? We would also need to know if the extra 34k will push you into the next tax bracket.
Sarcastic lazy answer, 34k * 25% minus your refund from last year.
Sarcastic lazy answer, 34k * 25% minus your refund from last year.
Posted on 6/2/15 at 7:13 pm to CubsFanBudMan
quote:
There's not enough info in your OP to calculate. Do you expect your overall income and deductions to be the same from 2014 to 2015? We would also need to know if the extra 34k will push you into the next tax bracket
What more do you need? I gave you exactly the taxes and whatnot paid ytd. I also said assume this is steady state meaning monthly my tax would not change and would add to the figures I posted above.
I just do standard deduction no itemization.
This post was edited on 6/2/15 at 7:15 pm
Posted on 6/2/15 at 7:52 pm to OleWarSkuleAlum
quote:
I just do standard deduction no itemization.
This is very helpful in the calculation. Also, any kids/dependents? Any other income (interest, dividend, etc), deductions (student loans), or tax credits?
Posted on 6/2/15 at 8:03 pm to OleWarSkuleAlum
Wages - 52,362
401k - 34,317
AGI - 86,679
SD - (12,600)
PE - (8,000)
TI - 66,079
Tax - 8,989
Estimated W/H - 5,040 = short 3,949.
Tax on 401k = 5,148. Without the 401k rollover, you could have expected a refund of 1,199.
Be careful of underpayment penalties if your 2014 tax was higher than 5,040.
401k - 34,317
AGI - 86,679
SD - (12,600)
PE - (8,000)
TI - 66,079
Tax - 8,989
Estimated W/H - 5,040 = short 3,949.
Tax on 401k = 5,148. Without the 401k rollover, you could have expected a refund of 1,199.
Be careful of underpayment penalties if your 2014 tax was higher than 5,040.
Posted on 6/2/15 at 8:53 pm to CubsFanBudMan
quote:
Also, any kids/dependents?
2 kids one wife.
quote:
Any other income (interest, dividend, etc)
Yes around $1k.
quote:
deductions (student loans), or tax credits?
Not that I know of.
Posted on 6/2/15 at 8:59 pm to CubsFanBudMan
quote:
Be careful of underpayment penalties if your 2014 tax was higher than 5,040.
What exactly does this mean? Last year our AGI was much higher but I received around 4k in a refund.
Posted on 6/2/15 at 9:03 pm to OleWarSkuleAlum
How old are your kids? The 2 extra dependents reduce your tax $1,200. If they both qualify for the child tax credit, that's another $2,000 reduction. The investment income increases your tax $150 Now you've reduced what you owe to $900.
I didn't mean to come across harsh when I said your OP didn't contain enough info to help. A pet peeve of mine when I prepared individual taxes was when clients talked to each other and one complained about his taxes being higher than another clients when they "made the same amount of money." The firm I worked for was a very niche firm, so a lot of our clients new each other and talked openly about that kind of stuff. Everyone's tax situation is different, and it takes a lot to get the complete picture.
I didn't mean to come across harsh when I said your OP didn't contain enough info to help. A pet peeve of mine when I prepared individual taxes was when clients talked to each other and one complained about his taxes being higher than another clients when they "made the same amount of money." The firm I worked for was a very niche firm, so a lot of our clients new each other and talked openly about that kind of stuff. Everyone's tax situation is different, and it takes a lot to get the complete picture.
Posted on 6/2/15 at 10:14 pm to OleWarSkuleAlum
quote:
She will not for this year.
Definitely the perfect timing to convert to ROTH.
Posted on 6/3/15 at 7:04 am to OleWarSkuleAlum
quote:
What exactly does this mean? Last year our AGI was much higher but I received around 4k in a refund.
The IRS calculates underpayment penalties based on your required current year payments (withholdings and quarterly estimates). The required amount is usually the lower of last year's tax or this year's tax. Since your AGI was higher in 2014, then chances are you will need to have paid in based on 2015 tax. I think if you owe less than $1,000 with your return, then you will not have any penalty. If you owe more, then you will be. The fact that you had a refund last year does not factor into the calculation.
Example A: 2014 tax = 5,000, 2015 tax = 9,000, 2015 withholdings = 6,000, no penalty
Example B: 2014 tax = 15,000, 2015 tax = 9,000, 2015 withholdings = 6,000, penalty
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