From the IRS website:
"No tax withheld. If you choose the direct rollover option, or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. If any part of the eligible rollover distribution is paid to you, the payer must
From the IRS website:
"No tax withheld. If you choose the direct rollover option, or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. If any part of the eligible rollover distribution is paid to you, the payer must generally withhold 20 percent of it for income tax."
—–When and how do I pay these taxes without penalty?
You can avoid withholding if you do a direct rollover or conversion (set up the account at destination and have them make arrangements to transfer it) if you specifically tell your 401k trustee not to withhold. When I was doing partial IRA to Roth IRA conversions, I told them not to withhold tax and I covered it by adjusting my W-4 allowances. Although, it would be too late to do that for a conversion in 2016, (or even do the conversion in 2016 if not already arranged).
Generally if you owe more than $1000 at tax filing time (unless you file and pay before Jan 31) you may also owe a penalty unless, you had at least as much withheld as the previous year or 90% of your tax liability the tax year you do the conversion. Note that if you have your 401k trustee withhold 20% towards tax, that 20% would be subject to 10% penalty if under age 59.5. So you should try to cover the tax for Roth conversion with other money instead of from the 401k.
You could have tax taken out of the 401k but it would be a bad idea, because the amount withheld for tax would not be put ito your Roth IRA, plus any amount distributed for tax becomes taxable income to you subject to a 10% penalty.
You can send in an estimated tax payment using Form 1040ES, or you can pay it when you file your income tax. There will not be a penalty unless the tax due is more than $1,000. If you pay when you file, the amount of underpayment penalty is a few dollars.
Make an estimated payment at the end of the quarter when you did the rollover.
You are not supposed to wait until tax time. However, you won't know the exact amount until tax time. You are supposed to estimate how much to pay earlier using Form 1040-ES.
if this would cause your ultimate tax liability to exceed $1K you would have prepaid what you anticipated it to be with a 1040ES for the quarter it occurred
if not payment at the end of tax season, April 17, 2017 would be required
You can pay them at tax time, but you may be hit with a failure to file estimated payment(s) penalty. Best bet is to figure out what you're likely to owe and make an estimated payment to both the IRS and your state.
You pay them when you do your tax return. You are going from a pretax to a post tax account.