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Irregular distributions within a calendar year


NHP920
Posts: 18
Topic starter
(@nhp920)
Estimable Member
Joined: 1 year ago

I will be taking $30k/per year in SEPP distributions, and I already took $10k out in December 2022 (one-third of the stub year).

Can I take out $10k in January, $10k in Feb, and $10k in March and not take any more the rest of 2023? 

5 Replies
dlzallestaxes@msn.com
Posts: 184
(@dlzallestaxesmsn-com)
Illustrious Member
Joined: 4 years ago
YES. You can take any amount at any frequency, just so you do not take more than the $ 30,000 PROVIDED THAT IS THE CORRECT CALCULATED AMOUNT PER YEAR.
 
You cannot choose an amount that YOU want to take. You must do specific calculations, as described elsewhere on this website. BE CAREFUL, and make sure that you do it correctly, and make sure that you used the new 2022 IRS TABLES, and not the 2021 factors.
 
We recommend that you use the template provided on this website.If you provide the information for the template, someone will check your annual figure. It would be rare that the figure would be an exact $ 30,000, unless you worked backwards from that figure and interest rate to the ACCOUNT AMOUNT needed, and put that into a SEPARATE IRA account.
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NHP920
Posts: 18
Topic starter
(@nhp920)
Estimable Member
Joined: 1 year ago

Thank you. I rounded down a little to make it a round number - so I will be using an interest rate of 4.720073% to make the numbers work.

I can't partition the account because I am using the account balance from January 2022 and I understand any change to the account after that date would invalidate that balance.

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dlzallestaxes@msn.com
Posts: 184
(@dlzallestaxesmsn-com)
Illustrious Member
Joined: 4 years ago

You might have a problem. You have to use an IRA balance that is "reasonable", and must be within no more than 6 month's prior. You cannot use a balance from Jan 2022 for a distribution in Dec 2022. Also, you cannot take 1/3 of the annual distribution in Dec. You can only use 1/12 (for 1 month's worth), 1/4 ( for 3 months' worth, or 1/2 (for 6 months' worth). I don't remember ever seeing 1/6 ( for 2 months' worth) or 1/3 (for 4 months' worth), but they may be allowed.

 

I suggest that you review the rules which are explained on this website. You might luck out by using the highest or applicable balance as of 6/30, or any month-end or date since then, and a related interest rate within 2 months before that date. You can also use any balance within any month since 6/30 that would give you the balance that you need.

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NHP920
Posts: 18
Topic starter
(@nhp920)
Estimable Member
Joined: 1 year ago

Are you sure? From the updated guidance last year: https://www.irs.gov/pub/irs-drop/n-22-06.pdf

"The account balance will be treated as determined in a reasonable manner if it is the account balance on any date within the period that begins on December 31 of the year prior to the date of the first distribution and ends on the date of the first distribution."

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dlzallestaxes@msn.com
Posts: 184
(@dlzallestaxesmsn-com)
Illustrious Member
Joined: 4 years ago

You are correct that this is the wording in IRS NOTICE 2022-6. I have contacted one of the authors of this notice  from the IRS Office of Legal Counsel for a clarification, and I will post her response when I receive it.

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