Self prepared 72t v.CPA prepared

L1: Self prepared 72t v.CPA preparedI am so glad to have found this website. I am recv. a lump sum pension 5/06-I will use Vanguard and applyingthe the 72t rule for SEPP. I am a newbie and reading this board scares me death of making a mistake. How many people actually do their own setup v an actual CPA setup? Also, please tell me when the calendar year is for sepp? The distribution from pension is 5/06 so I will need to take all those months for the year of 2006 prior to 5/06? I probably won’t get the money for 60 days, but 5/06 is the distribution date-right? I hope this makes sense I havea million questions. Thanks so much for your help!
J2006-03-19 18:50, By: Joe, IP: [205.188.116.133]

L2: Self prepared 72t v.CPA preparedJoe,
When I started my SEPP in 2003 I began by looking for CPAs in the area that were knowledgeable about the law regarding 72)t). It didn’t take many phone calls of interviewing local CPAs to determine that all of the ones I called had little or no working experience with this part of the IRC.
I gave up and did the work myself. It doesn’t have to be that hard.
Here are some suggestions I would offer:
1) Use this web site!!! Read everything on this site including going back through the forum.
2) Keep your plan as simple as possible.
3) Document all your actions.
4) Dispell all thoughts of trying to pull more money out after you start (have a safetynet in place before you start).
5) Sit back and watch your plan go down the timeline and stay in touch on this site for news.
There are people whohang out on this site that could help you professionally if you still want to go that route and can’t find anyone local.
John2006-03-19 19:25, By: John, IP: [71.208.239.248]

L2: Self prepared 72t v.CPA preparedHello Joe:
I think your subject question is the last question you really have in a list of 50 to 100. However, there is hope & a solution. Buy the book available here and read it. Since I am the author, I will make you an offer; if your not satisfied with the book’s content, I will give you your money back.
Read the book over a week; then you will be prepared to answer 90% of your own questions and put the remaining 10% to the board participants here.
Regards
TheBadger
wjstecker@wispertel.net
2006-03-19 19:30, By: TheBadger, IP: [66.109.211.254]

L2: Self prepared 72t v.CPA preparedJoe – I’d follow the sage advice of getting the 72(t) guide from “The Badger”. I did and was able to start my SEPP last summer with full confidence after readingthe documentationand reviewing the Q&A on this board. With this information (i.e., templates included) as well as the calculator(s) on this site you will be able to set up and document your specific plan to meet your needs. In addition, it sounds like an offer you can’t go wrong with. Good luck.
JerseyJim2006-03-19 20:46, By: JerseyJim, IP: [68.193.103.27]

L2: Self prepared 72t v.CPA preparedJoe:
What a deal from TheBadger! But once you get the book and study it, you will want to keep it and not claim the refund. I am an investment advisor and have used his book quite extensively, along with the calculators on this site. But let me answer some of your questions before you begin your study.
First of all, relax. I sense you are already in the panic mode and it’s not that hard. The72(t) start date is the date of your first distribution from your SEPP Plan Universe. Since your are planning an IRA Rollover, then don’t make any calculations until the transfer from your pension plan to the IRA is complete.
Second, be sure to use the “Trustee-to-trustee” method to move the money from your pension plan to the IRA. If you take “constructiver receipt” of the funds, there is a mandatory 20% withholding, and you have to come up with other funds to replace this withholding as part of the rollover if you want to avoid the tax and possible penalty.
Lastly, learn about “stub years” for distributions. Bill’s book will explain this. You can start with any month and date, and then do your calculations for the 5-year rule from that date. Remember, the start date is the date of your first SEPP distribution.
Good luck and enjoy the book.
Jim2006-03-20 08:41, By: Jim, IP: [70.184.1.35]

L2: Self prepared 72t v.CPA preparedI am a CPA, and frequent responder to this forum. First, there are many excellent tax preparers who are not CPAs. Enrolled Agents (EA) and Public Accountants (PA) are often more knowledgeable about 72TSEPPs than CPAs because they are used to dealing with smaller taxpayers. Regardless, 99% of all CPAs, EAs,and PAs have no experience with this area, and most of them do not even know that it exists, how it works, or the nuances.
Before you consider going down this road, you should post some key information for comments. For example, your date of birth, the amount of the Lump Sum, and if it is coming from a 401-k, pension, etc. Many people are not aware that if you are 55 and separated from service, you can take distributions before 59 1/2 without penalty, and without setting up a 72T SEPP. Sometimes it is advisable to set up multiple 72T SEPP accounts for added flexibility.
As mentioned by others, do not put your entire distribution into the 72T SEPP. Set some of those funds aside in a separate account for emergencies so that you don’t “bust” your 72T SEPP if you need additional money during the next 5 year/59 1/2″critical period”. If you alter your plan within the first 5 years, or before you are 59 1/2, whichever is later, then you will be subject to a 10% penalty RETROACTIVELY on all distributions you have taken since inception of the 72T SEPP, even if its a few days before the end of this period. It can be devistating.
2006-03-20 10:44, By: dlztaxes, IP: [4.175.9.203]

L2: Self prepared 72t v.CPA preparedMy questions are these? I started a min. dist last year and am
wondering does the IRS require that the amount is adjusted for this
year according to the acct balance 12/31/05 and secondly, is it OK to
adjust my disbursement amount accordingly at this point in the year
(having rec’d 3 monthly disbursements thus far.

THANKS FOR THE HELP!
2006-03-21 09:03, By: kjw, IP: [70.172.212.37]

L2: Self prepared 72t v.CPA preparedSee reply to your separate post.2006-03-21 14:41, By: Alan S., IP: [24.116.165.157]

L2: Self prepared 72t v.CPA preparedI also chose Vanguard. Be aware that all 1099,s they issue will be coded as 01. This requires the filing a 5329 whichcan beanother signal for an audit. I am in the process of switching to schwab for just this reason. I like Vanguard but they are stubborn on this issue. Even if your plan islegal no one needs added attention from the IRS.- joihn2006-03-22 21:44, By: john, IP: [63.195.119.175]

L2: Self prepared 72t v.CPA preparedJohn – as time passes my guess is that more Trustee/Custodians will also take the Vanguard approach.
When a 1099 is coded witha ”2”, the Trustee/Custodian is stating that they know the 10% penalty doesn”t apply. On many SEPPS, it”s not difficult to know the first year, but as time passes (especially wne the plan usesannual re-calculation or has multiple accounts) monitoringcompliance becomes more difficult. 2006-03-23 04:43, By: Gfw, IP: [172.16.1.72]

L2: Self prepared 72t v.CPA preparedi look forward to the discussion thread that will address communicating with the IRS when they want more info than the 5329.2006-03-23 11:03, By: squeaky, IP: [69.238.169.151]

L2: Self prepared 72t v.CPA preparedFidelity Investments is also coding a 1 for 1099s2006-03-23 11:38, By: Don, IP: [24.32.37.113]

L2: Self prepared 72t v.CPA preparedFidelity Investments coded my SEPP for 2005as a 2.
In Dec ’04, I sent in the paperwork, cited which account to use, which method to use (amortization) which Fed mid term month and what percentage (120%)to use, and what month to start payments in (adhering to the either-of-two-months-previous interest raterule). I think I requested to use end of year ’04 balance, but I don’t remember if that choice was presented in the paperwork.
They did the rest. They calculated the monthly amount, using end of year ’04 balance. It has gone smooth since, I get the exact same amount every month, especially when I got the lovely code 2 on the 1099 for 2005. Their calculated monthly amount was within a dollar or two of the caluclator on this site.
I wonder why the inconsistency; did you go throughbasically the same procedure to start yours with them?
Rick2006-03-27 04:31, By: Rick S., IP: [69.231.210.90]