Gracefully Ending SEPP Distributions

L1: Gracefully Ending SEPP DistributionsI”ve been taking out SEPP distributions since 2004. First one started March 22 2004 – Once a yearSecond started Sept 15 2004 – twice a year Sept 15 & March 15.My birthdate is 8/1/1950.I”m wondering when I can end the distributions and be sure of avoiding IRS problems.Thanks much Danny 2008-08-25 07:59, By: Danny, IP: [63.228.52.167]
L2: Gracefully Ending SEPP DistributionsI think you have BIG PROBLEMS. Forget about “Ending SEPP Distributions Gracefully”. You”ve already busted your plan, many times. You owe a 10% penalty retroactively on all of your distributions cumulatively since you started in March, 2004.
You obviously did not understand the SEPP 72-T regulations, or received terrible advice. If you took your 2004 total annual distribution in March 2004, then you were not permitted to take another distribution until after 1/1/2005. In calendar 2005 and future years it did not matter what frequency you used, so long as you did not exceed the annual distribution calculation in total distributions.
However, when you took the Distribution on Sept 15,2004, you busted your plan retroactively and for all future years because thereafter you did not have a viable plan.
One of the other experts on this list-serve might want to comment on whether or not you could just pay the 10% penalty on the 2004 distributions, and then restart your SEPP 72-T using your 12/31/2004 balance and an appropriate interest rate to make your 2005 and future distributions part of a 2nd plan which is viable.2008-08-25 09:10, By: dlzallestaxes, IP: [96.245.168.21]

L2: Gracefully Ending SEPP DistributionsDLZ- Perhaps he has multiple IRA”s like I do and has a separate SEPP plan running on each of two separate IRA accounts, also like I do. If that is the case, I don”t think there is a “bust” problem, but he needs to clarify this before we reply to his question. DANNY- As a footnote, Gordon”s calculators on this website can answer your questions about when each SEPP plan ends–assuming you have TWO different plans with TWO different IRA accounts. Go to the drop down menu on left, and select SEPP Plans, then CALCULATORS, then LAST PAYMENT DATE. Plug in the separate date values and your DOB for the two SEPP”s and you will get date when each plan ends. After that you can take nothing or any amount you want from that specific SEPP IRA that has ended without the 10% penalty, just regular taxes. KEN2008-08-25 10:35, By: Ken, IP: [75.67.65.254]

L2: Gracefully Ending SEPP DistributionsOops !!!!! I didn”t realize he was talking about 2 SEPP 72-T plans. I thought he was talking about the distributions when he said first and second.
Since you will be 59 1/2 after each plan runs 5 years, the first one will end 3/22/2009. ( I”d use 4/1/2009 if you wanted to take any more distributions from that one, but you can stop then also, but not before,) Even though you took the 5th ANNUAL distribution on 3/22/2008, you must wait for that 5th SEPP year to end.
The 2nd plan started 9/15/2004, and you might have a problem with that one because SEPP works on calendar years, not fiscal years. On that 2nd plan, you were only allowed to take EITHER 4/12 or 100% of the annual distribution in 2004, not 50%. If your annual distribution is $ 12,000, then that would have been $ 4,000 for 2004. For 2005 you had to take exactly $ 12,000 no more/no less regardless how you split the payments. If you took $ 6,000 in 2004, you busted that 2nd plan from the start, even though you took $ 12,000 in two $ 6,000 payments. If you continued a $ 4,000/$ 8,000 pattern you would be okay, if you started with $ 4,000 in 2004.
If the 2nd one is viable, it ends 9/15/2009.2008-08-25 10:50, By: dlzallestaxes, IP: [96.245.168.21]

L2: Gracefully Ending SEPP DistributionsYes I do have 2 IRAs!I did take 50% on the second in 2004 – didn”t know about that partial year issue.The IRS hasn”t said anything yet…Thank you. 2008-08-25 11:04, By: Danny, IP: [63.228.52.167]

L2: Gracefully Ending SEPP DistributionsDanny,
We understand that you have two IRA accounts. When you have two IRA accounts you may be using them under a single SEPP plan or two totally independent SEPP plans, one for each IRA account.
You have two IRA accounts, but are you set up with one SEPP or two? It makes all the difference. For example, if you have two, they are independent and you can bust one but still be OK with the other.
Note that if you do have two, they started 6 months apart and would be using different account balances and interest rates.2008-08-25 17:35, By: Alan S., IP: [24.116.165.60]

L2: Gracefully Ending SEPP DistributionsI”ve just been reminded again how important it is to be clear concise and complete when describing something! :-DI have 2 separate SEPPs2008-08-25 19:04, By: Danny, IP: [63.228.52.167]

L2: Gracefully Ending SEPP DistributionsAs I said above, you busted the 2nd one from the start. The IRS may never catch it, but you have to decide whether to “cut your losses” now, or hope you can get to the end of your 5-year period, stop your SEPP 72-T then, and play “IRS roulette” that they never figure it out. ( Their involvement with the Stimulus Payment fiasco may help you luck out because they are very short of audit personnel.)2008-08-26 10:57, By: dlzallestaxes, IP: [96.245.168.21]

L2: Gracefully Ending SEPP DistributionsAs I said above, you busted the 2nd one from the start. The IRS may never catch it, but you have to decide whether to “cut your losses” now, or hope you can get to the end of your 5-year period, stop your SEPP 72-T then, and play “IRS roulette” that they never figure it out. ( Their involvement with the Stimulus Payment fiasco may help you luck out because they are very short of audit personnel.)2008-08-26 10:57, By: dlzallestaxes, IP: [96.245.168.21]

L2: Gracefully Ending SEPP DistributionsAs I said above, you busted the 2nd one from the start. The IRS may never catch it, but you have to decide whether to “cut your losses” now, or hope you can get to the end of your 5-year period, stop your SEPP 72-T then, and play “IRS roulette” that they never figure it out. ( Their involvement with the Stimulus Payment fiasco may help you luck out because they are very short of audit personnel.)2008-08-26 10:57, By: dlzallestaxes, IP: [96.245.168.21]

L2: Gracefully Ending SEPP DistributionsAs I said above, you busted the 2nd one from the start. The IRS may never catch it, but you have to decide whether to “cut your losses” now, or hope you can get to the end of your 5-year period, stop your SEPP 72-T then, and play “IRS roulette” that they never figure it out. ( Their involvement with the Stimulus Payment fiasco may help you luck out because they are very short of audit personnel.)2008-08-26 10:57, By: dlzallestaxes, IP: [96.245.168.21]