72t calculation

L1: 72t calculation I plan to start my 72t payments next year and have a question regarding the coding on the Form 1099-R. (I am under 59 1/2).
The custodian of my IRA has some rules that I don’t agree with concerning the calculation of the payments. For example, only one SEPP payment per IRA, must use the previous year-end balance for calculation, any IRA that is used in the payment calculation must have a distribution, etc., etc.
How important is the Distribution code of ” 2 ” on the 1099-R? If I do my own calculation, it will coded as a ” 1 “.
How concerned should I be about getting the code ” 2 ” ??
Thanks
2005-01-05 19:31, By: Gary T, IP: [24.145.164.87]

L2: 72t calculation Hello Gary:
It’s interesting that you raise this question at this time as I had occassion several hours ago to download and print the new & improved 1099R instructiond for 2004 from www.irs.gov. Talk about a cluster f***. The instructions as of about 3 hours ago instruct custodians to code all SEPP plans with a “1” thus requiring all taxpayers to file Form 5329.
TheBadger
wjstecker@wispertel.net
2005-01-05 19:52, By: TheBadger, IP: [66.250.23.21]

L2: 72t calculation It appears that the IRS did indeed change the instructions again. Here are the code 2 exceptions from the instructions:
2Early distribution, exception applies. 8, D, or P Use Code 2 only if the distribution is:

A Roth IRA conversion (an IRA converted to a Roth IRA) or a reconversion if the participant is under age 591/2,
An early distribution made from a qualified retirement plan or IRA because of an IRS levy under section 6331,
A section 457(b) plan distribution and not subject to the additional 10% tax. But see Section 457(b) plan distributions on page R-8 for these distributions that may be subject to the 10% additional tax, and
A distribution from a qualified retirement plan after separation from service where the taxpayer has reached age 55.
It appears that a code ‘2’ for SEPP plans has been excluded again!2005-01-06 04:36, By: Gfw, IP: [172.16.1.74]

L2: 72t calculation Let’s see if I have this clear. SEPP distributions for 2003 were coded 2. But, beginnig with Tax Year 2004 (just completed), SEPP distributions will be coded 1, regardless of when they started.
Can we assume that for the year someone turns 59 1/2 they will have two codes; Code 1 for SEPP and Code 2 for all distributions after the age change?
I have some clients that started SEPP this year and some that have been running for several years. Sounds like a letter to clientsis in order.
Jim2005-01-06 08:27, By: Jim, IP: [68.1.157.228]

L2: 72t calculation The 1099R instructions tell us that commencing in 2004; all SEPP distributions are coded as a “1”. Now, when the taxpayer attains age 59 1/2 two situations present themselves:
1. Taxpayer’s SEPP plan still continuing becuase he started at age 55 or older. These should still be coded as a “1” (See page R-8 of the instr).
2. Taxpayer’s SEPP plan ends @ age 59 1/2 becuase he commenced it at age 54 or earlier. This taxpayer should get two 1099Rs; one with a “1” and one with “7”.
Above is what should happen. I give 1 trustee in 10 the probability of getting it right.
TheBadger
wjstecker@wispertel.net
2005-01-06 11:41, By: TheBadger, IP: [66.250.23.21]

L2: 72t calculation I am retiring the end of February, I will be taking a lump sum pay-out on my pension of 82,000.00. I will be rolling this over into a IRA. I would like to use the 72t distribution to receive equal payments over a 5-year period. (I am 55). I am told that I can only receive 5% of the 82,000 distributed over a 5 year period. Is this correct?2005-02-05 15:56, By: k.hallmark, IP: [65.32.235.63]

L2: 72t calculation I am retiring the end of February, I will be taking a lump sum pay-out on my pension of 82,000.00. I will be rolling this over into a IRA. I would like to use the 72t distribution to receive equal payments over a 5-year period. (I am 55). I am told that I can only receive 5% of the 82,000 distributed over a 5 year period. Is this correct?2005-02-05 15:56, By: k.hallmark, IP: [65.32.235.63]