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IRS has the wrong single life table?


Chris McNally
Posts: 2
Topic starter
(@chrismcnally)
Active Member
Joined: 1 month ago
  • Date of Birth: Nov 1964
  • Age: 57 (by year end)
  • married paying quarterly tax estimates
  • 72t Method: Amortization, starting 5/1/2021
  • Life table: Single
  • Stub Year? Yes, 2021 (going to take 8 months worth of the yearly dist)
  • Annual Recalc*: no
  • AFR* Rate: 1.6
  • Balance(s)*: $989,466 in an old rollover 401k from former employer. Not planning to touch my IRA or my other 401k from my most recent employer. Have cash on hand and rental income as well to live on
 
When I go to the IRS official FAQ https://www.irs.gov/retirement-plans/substantially-equal-periodic-payments, it points me to a Single Life table that indicates at age 57 I have 29.8 years to amortize my 401k balance, but all the calculators use 27.9 years instead. It seems from reading this site that the Single Life Table has changed but we don't think the IRS intends for us to use it for SEPP payments until 2022.
 
This worried me when I first calculated my SEPP payments in April of this year. I took my first monthly distribution on 5/1/2021. I've had 5 payment, but now since reading this site I've decided to recalculate and take one final payment this year to bring me to my new yearly distribution that I've calculated using the old single life table found on this site and others. I'm going to use 1.6 as my interest rate (120% of April 2021s interest rate of 0.89 is 1.68, and I do not want to round up to 1.70 so I rounded down to 1.6). I choose April 29th 2021 statement, which I printed and saved as a PDF, since it is the maximum balance for the month of April. I still feel a little funny about the 27.9 vs 29.8. Every IRS link I found brought me to a single life table with 29.8 for a 57 year old. My new calc yields $41,153.29 which is more than we need given our rental income and cash we have but I'm OK with some extra since our tax situation is good for the next 5 years.
 
Can I get some help on the single life table to use? It bothers me that the IRS points me to the wrong table.
2 Replies
dlzallestaxes@msn.com
Posts: 132
(@dlzallestaxesmsn-com)
Illustrious Member
Joined: 2 years ago

I didn't look at the IRS website, but you are correct that the new life expectancy tables were deferred from 1/12021 to 1/1/2022.

In your posting, and your calculations, however, you are using an incorrect AFR. 120% of the April 2021 interest rate of .89 is 1.068, not 1.68.

Redo your calculations, and then adjust the amount that you are taking for the rest of the year to come up to the correct 8 month Distribution. If you are already over the that amount, then I suggest that you just take the balance for the ANNUAL DISTRIBUTION.

P.S. With all that Congress has imposed on the IRS with additional responsibilities, but no additional funding, and reduced personnel in total and on site, this is only one of many screw ups by the IRS. All tax professionals are annoyed at the issues that the IRS has caused, not the least of which is millions of unopened envelopes, and unprocessed tax returns and refunds. 

 

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Chris McNally
Posts: 2
Topic starter
(@chrismcnally)
Active Member
Joined: 1 month ago

Thank you for your reply. You are right, I wrote in the post 1.6 but I meant 1.068, and 1.06 which is the number I used in my calculation. As you suggested, I am going to end the monthly payments and take one last payment to balance out the distribution so that it's the same each year (except my stub year which will be 8 months worth). Thank you.

 

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