Roth Conversions, I-Bonds, and 2210

[Bill M]

I do a Roth Conversion each year to fill the lower tax brackets. And I deliberately overpay (with 4868) by $5K to get I-Bonds as the refund. This didn't work too well in 2015.

Problem is the AMT, and I couldn't know until November that it would apply. So the original estimate of Roth Conversion was too small (significantly), and I did an additional Roth Conversion in December (and paid the estimated taxes on the conversion amount). All seemed good except for the form 2210.

I've never been able to match the IRS figuring for the estimated tax penalty. Even with the CP30 notice, my numbers still come out wrong. It never mattered until I started using the tax refund to buy I-Bonds. For 2015 I calculated $300-350 for estimated tax penalty (put 350 on line 79), and included an extra $900 in the December 1040ES payment. It was more than enough to cover. But they calculated $364, cancelled the I-Bond purchase and refunded the extra $5+K. In re-reading the instructions for form 8888, anything beyond a simple math error cancels the I-Bond purchase.

Has anyone figured out a way to buy I-Bonds and still do a late-year Roth Conversion?

[FiveK]

Has anyone figured out a way to buy I-Bonds and still do a late-year Roth Conversion?

Have enough withheld so you have no penalty and no need to pay estimated tax?

[Daryl]

I feel your pain! My request to file and extension (Form 4868) / filing my taxes within a week triggered a CP23. The IRS ignored my Form 8888. In the end, I just got my money back and put it in an Ally savings account.

[jatwell]

Just file an extension with a $5k overpayment before tax deadline. That way you don't have to overpay throughout the year and you can fully do your taxes and know exactly what you owe. As mentioned, wait a few weeks before officially filling after the extension.

There's a section here halfway down covering it:

http://thefinancebuff.com/backdoor-to-p ... bonds.html

[Bill M]

Just file an extension with a $5k overpayment before tax deadline. That way you don't have to overpay throughout the year and you can fully do your taxes and know exactly what you owe. As mentioned, wait a few weeks before officially filling after the extension.

There's a section here halfway down covering it:

http://thefinancebuff.com/backdoor-to-p ... bonds.html

That is exactly the procedure I've followed. And it has always worked great. Until the second Roth Conversion was large and late in the year.

It seems that a math error on form 2210 isn't a "math error" but is rather a "refund offset," though I don't understand why. If I turn it into a deliberate math error (like adding extra interest due on the 2210) will that turn it into a "math error"?

[MrDrinkingWater]

From your description of your Form 2210, it sounds like you had one or perhaps two quarters where you underpaid tax, even when using the annualizing income method.

It sounds like the numbers you moved from Line 25 of "Schedule AI - Annualized Income Installment Method" table that go back up into Line 18 of Part IV "Regular Method Section A Figure Your Underpayment" caused your Line 25 in Part IV Regular Method to show one or more quarters of underpayment.

I suppose you could double-check the numbers in your "Schedule AI - Annualized Income Installment Method" table. Maybe you have a mistake there and you can file a 1040X that reduces or completely removes the penalty?