72t – ending distribution & calculations – 2 c

L1: 72t – ending distribution & calculations – 2 cHello,
First:
I have a client who began 72t in July of 2000. At that time he took a lump sum for Jan through June and monthly thereafter – so he took a full distribution for 2000 but took the lump in July 2000.
He’s now past 59-1/2 and wishes to change his 72t distributions. I assume he could make the change as early as Jan. 2005. Is this correct or does he have to wait until July 2005?
Second:
His wife begins her 72t now. His CPA did the calculation and then rounded up to $2500/month (rounded up about $40 per month from the highest calculation). Is this going to be a problem? Since it is still in the first year I could adjust one payment to bring it down if so but I have to act now.
Thanks2004-11-04 12:42, By: Mobey, IP: [67.106.28.17]

L2: 72t – ending distribution & calculations – 2 cHello Mobey:
You client must wait until sometime in July, 2005 to stop or otherwise modify his distributions. The law & rules are very clear — 5 years are measured to the day.
Regarding the wife, I do not think rounding up $40per month is smart; I don’t even think rounding up $40 per year is smart. No one has ever tested this issue with the IRS & I suspect you and your clientdo not want to be the 1st; therefore fix it now.
TheBadger
wjstecker@wispertel.net
2004-11-04 12:56, By: TheBadger, IP: [66.250.23.22]

L2: 72t – ending distribution & calculations – 2 cMobey:
Go to the Home Page of the web site, “Calculators” on the left and look for “Last Payment Date” to calculate how long distributions must be taken before changes can be made. Just remember that distributions must continue for at least 5 years and the recipient must pass age 59 1/2. If started, for example,at age 50 then 59 1/2 is the controlling factor. If started at age 58 then 5-years is the controlling factor. Too many people think this is an “either – or” but it’s really a “both.”
One thing thatleads toconfussion is the latter case when the recipient passes age 59 1/2 and the custodian starts reporting “Normal Distributions” on the 1099-R. In a 72(t) the age requirement may be complete but the 5-years isn’t, so the recipient must continue their reporting under the SEPP rules.
Jim2004-11-04 13:11, By: Jim, IP: [68.1.157.228]