Handling the Tax Bill on a Roth Conversion

You may need to have more withheld from your paycheck or make larger estimated payments.

I converted my 401(k) to a Roth IRA in 2010 and took advantage of the option to split the tax on the conversion between my 2011 and 2012 returns. Do I need to increase my withholding for 2011 or make quarterly estimated tax payments to avoid an underpayment penalty?

You might be okay for 2011, but you’ll probably need to withhold some extra money in 2012.

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.