72t on the Net

IRS SEPP Audit

Thank you for such a detailed explanation of what the IRS put you through. Fortuneately, this is not typical and I really don't think the 5329 triggers these since there are now very few custodians coding the 1099R with the exception code. But those of us who post here will find your story quite educational and we appreciate this post. Actually, - continued...

IRS SEPP Audit

I have not posted here before but have read the information on this site. I thought some of you might be interested in this. I had been looking at an SEPP since the late 1990's and I have two friends who have completed their SEPPs. My 2008 tax return was audited because I'm now taking an SEPP. Fortunately the outcome for me was a "No Change" lett - continued...

72(t) SEPP Internal Account Change

Pete, If I understand your collective responses correctly, you now have 3 IRA accounts that constitute your SEPP plan, and you want to create a 4th account by direct transfer using part of the balance from one of the 3 original IRA accounts. It is certainly possible that this action could be considered very similar to that which gave rise to PLR - continued...

72(t) SEPP Internal Account Change

Alan...The mutual fund account in question is a third party manager platform that must be under it's own account number within my 72t plan. I just want to sell a percentage of the funds and invest them in another new account within the same 72t plan. This does not involve any partial fund transfer to another custodian..........My financial advis - continued...

72t year end

Thanks Gfw. So this is what I learned a few minutes ago. (I tried responding earlier but received an error message.) I called Fidelity back and learned that it's not a Fidelity rule. I guess that they are concerned that with a change from lump sum to monthly, the dollar amount would change and thereby cause me to incur the 10% penalty. I don' - continued...

72t year end

There are always options. If you have confidence in what your are doing, Fidelity only needs to be involved to the extent that they send you the requested distribution amounts. You won't receive a code of '2' on your 1099, but using even a simple tax program like Turbo Tax, it will add the appropriate forms to claim the exemption. Also make sure - continued...

72t year end

Thank you. I just downloaded the form that Fidelity wants me to fill out in order to begin my distributions. I see an option where one could make a change to their Personal Withdrawal Service Form (PWS). But it doesn't ask what change the person is making. It just says "check this box to change an existing PWS plan". So the question that I wi - continued...

72t year end

CLARIFICATION Cost Basis identification of sales will be for TAXABLE ACCOUNTS, not for sales within IRAs or RETIREMENT ACCOUNTS. Sorry if I confused anyone by my posting. ROSA Unless you are starting your distributions in Sept because of the interest rate that you are using in your calculation, you could take your 1st distribution in Dec, and it - continued...

72t year end

Rosa: The discussion about cost basis will not affect you at this time and you shouldn't worry about it. Focus on the rules for setting up a good SEPP Plan. Study the FAQ's and other information on this site, and keep asking questions ... we like to answer them! Good luck and have a safe holiday. Jim - continued...

72t year end

Thank you for the detailed information you've provided. But I must admit, the information is way above my level of comprehension. I'm sure you're providing me guidance of some sort, but I'm not sure how I may use it. Suffice it to say, I have a lot of homework to do with regard to my understanding 72t's and my future distributions and I hav - continued...

72t year end

>>A nuance she brought to my attention today is "cost basis" from "non-deductible contributions to IRAsInteresting... especially since most companies have never tracked traditional non-deductible contributions. It has always been up to the individual. - continued...

72t year end

Just to be fair to Fidelity and the advisor, and any advisor, they may think that they are doing you a favor by recommending monthly distributions because these can be programmed into their computer, and minimize the problems that you can cause yourself by self-directing the payments. It is imperative that whether you direct the payments yourself, - continued...

72t year end

Wow! I should have a PHD after all of this.. : ) I sincerely want to thank all of you for the info. I will be re-addressing this matter with Fidelity. A lump sum would be extremely helpful to me right now, but not if I have to take a lump sum each and every year... And if Fidelity's expenses are what is causing my advisor to "advise" me other - continued...

72t year end

This Rep was probably interpreting the meaning of the referenced code section on his own. And his conclusion would be quite reasonable. However, this underscores the fact that many facets of 72t plan administration have evolved out of PLRs or tax court decisions, and therefore even a rational interpretation of the code could well be incorrect, as - continued...

72t year end

>>however, I would NOT be able to change to a monthly distribution beginning January 2011.He is probably quoting a Fidelity rule, not an IRS rule. Except for possible variations in teh first and last year, You can take any amount at any time as long as on 12/31 you take out the amount of the calculated annual distribution - no more and no less. 72 - continued...

72t year end

GET ANOTHER SPECIALIST OR GO TO ANOTHER COMPANY WHO UNDERSTANDS SEPP 72-T. You can change the frequency of your payments during any year, and in various years, so long as your ANNUAL DISTRIBUTION is the same, except for the possible prorata amounts in the first and last year. - continued...

72t year end

Thank you! That's a relief! I misunderstood the plan. I have another question. A retirement specialist at Fidelity, who manages my IRA, stated to me that setting up a 72t under the ammortization method would allow me to take a lump sum for 2010 however, I would NOT be able to change to a monthly distribution beginning January 2011. She mentio - continued...

72t year end

This question is asked, and answered, almost daily. The rules are simple : 1. You must take distributions which equal 5 times the annual calculated amount. 2. You must continue the plan for at least 60 months, or until 59 1/2 if later. 3. Even though you might take a full year's distribution in the first month, and every year afterwards, and t - continued...

Account balances to use

Another point often missed or confused is that there does not have to be any relationship between the amount withdrawn or the amount of income the account is earning, vs. the rate used in the initial calculation and the rate actually being earned in the SEPP 72-T account(s). If the amount withdrawn exceeds the amount earned, it only means that you - continued...

72t year end

Start with our First Modification Date caluclator http://72t.net/72t/Calculator/First/Modificaton/Date Input you information and your questions will be answered - continued...

72t year end

Hello: If I were to set up a 72t this month and take a lump sum payment does that mean that my year one is 2010? And my end date of the plan would be Sept. 2014? Or is the end date of the plan August 2015 which is when I turn 59 1/2? - continued...

Setting up a 72T

Thank you all so very much for your assistance. I wish I had known about this forum months ago... But like they say, better late than never... - continued...

Account balances to use

When you consider the term "reasonable amount" in setting up your SEPP Plan, you must consider it from two angles. Alan has addressed the "reasonable amount" aspect from the viewpoint of what the IRS is likely to accept. I will address the term from the standpoint of survival of your plan over the long term. Keep in mind that the interest rate u - continued...

72 (t) SEPP Internal Account Change

Thank you. I have a basic premise that I taught my kids, and other tax practitioners When you communicate verbally or in writing, the main idea is not to make sure that you are understood, but rather make sure that you cannot be misunderstood. Too bad Congress and the IRS never learned this lesson. - continued...

Setting up a 72T

Re the other question you asked - Yes, after you correctly calculate your annual SEPP distribution, you can take out that entire amount in the first year of your plan, even if you start your plan as late as December. You can also take out a pro rated amount by the month of your initial distribution, but you CANNOT take out some amount in between th - continued...