120% of the mid term rate

L1: 120% of the mid term rateWhen figuring the interest rate for distribution. What happens if an individual decides to use 7% withdrawl rate rather then the current 4.12% set by irs from a tax stand point? Will a portion of the distribution avoid the 10% penalty (the 4.12% portion) and the remainder (2.88% portion) be subject to the 10% penalty? Also how does the irs track your distributions?
Thanks Art

2003-02-04 11:19, By: JAG, IP: [127.0.0.1]

L2: 120% of the mid term rateThe entire distribution will be subject to the 10% tax since your SEPP plan will be bust from day number one!
The IRA Custodian/Trustee reports the amounts annually to the IRS on form 1099R2003-02-04 11:28, By: Gfw, IP: [127.0.0.1]

L2: 120% of the mid term rateHello Art:
If you use 7%, and are audited, IRS will disallow the entire SEPP plan under IRC 72(t)(2)(A)(iv) and therefore assess the 10% penalty plus interest on 100% of the distributions.
Regarding “tracking”, to the best of my knowledge, the IRS does not track intra-year distributions but does electronically receive the equivalent of your 1099R; therefore, I assume that the great IRS computer in the sky does compare your 1099R”s between years.
TheBadger
wjstecker@wispertel.net

2003-02-04 11:29, By: TheBadger, IP: [127.0.0.1]