72 t, 5 years, additional withdrawal at 60

L1: 72 t, 5 years, additional withdrawal at 60I am now 59-1/2. Have a 72t at ameritrade and a self directed firm (rental property owned inside my ira). I will be receiving my 5th distribution from both in August 2017. It appears I must wait until the end of the 5th year (2018) to take any additional funds, even though I am 59-1/2. Is this correct? As a point of interest, how would the irs find out about any extra withdrawals, absent an audit? If I did take an extra withdrawal, would it bust my 72 t, since I am over 59-1/2? This could be very expensive!
thank you2017-06-09 20:21, By: Scott, IP: [70.187.156.145]

L2: 72 t, 5 years, additional withdrawal at 60Is this correct? Yes.
absent an audit? You never know. It could result from an audit that starts with nothing about your 72t. What is the risk that you are willing to assume.
If I did take an extra withdrawal, would it bust my 72t… Yes.2017-06-09 20:38, By: Gfw, IP: [216.80.120.234]

L3: 72 t, 5 years, additional withdrawal at 60Although you didn’t ask, if you have ANY involvement with the operation of the rental property owned by your self-directed IRA (i.e. ROBS), you may have already violated IRS regulations. This is not the platform for discussing this aspect. Check with a tax professional, not the company handling it. (FYI, I just made a presentation to 50 tax practitioners on these issues the IRS takes into account when disallowing these arrangements.)
BTW, you cannot take the additional distribution after 59 1/2 until it is 60+ months since the initial distribution.2017-06-09 21:37, By: dlzallestaxes, IP: [173.75.240.211]

L4: 72 t, 5 years, additional withdrawal at 60yes I am aware of the rules on involvement in rental property (SDIRA.) I have zero involvement in it. Use a custodian for everything, lease signing, etc. thanks for the comment.2017-06-09 22:18, By: Scott, IP: [70.187.156.145]

L5: 72 t, 5 years, additional withdrawal at 60If you take out more than the recalculation plan generates, the plan is busted but the retroactive penalty only applies to distributions you took prior to age 59.5. Sounds like you have a single SEPP plan for which two IRA accounts are included. Therefore, if it matters you do not have to take a SEPP distribution from each account. You can take it in any combination from the two accounts. If you can hold out until 5 years from the date of the first distribution your plan will end and you can avoid busting it. Another approach you might consider despite the fact it may not work with a 5 year plan would be to distribute the 6th calendar year recalculation inJanuary of the 6th year. For example, if your first distribution was on 10/15/2013 your plan ends on 10/16/2018 but you will have taken 60 months of distributions by the end of 2017. Normally, you cannot take another until the plan ends 10 months later, but if you took a distribution early in 2018 using the same recalculation method, the IRS might be more inclined to accept it than if you just distributed some random amount before the plan ended.2017-06-10 15:48, By: Alan S, IP: [174.126.90.174]

L3: 72 t, 5 years, additional withdrawal at 60From our FAQ…
Q. Assuming the 5-Year rule, when can payments be modified? A. In 1998, a tax court held that a payment received by a taxpayer after he received five equal annual installments and after he reached age 59-1/2 was a modification of the Substantially Equal Periodic Payments. The Court held that the modification occurred within the 5-year period beginning with the first payment, thus triggering the recapture of the 10-percent penalty tax. The Service argued that the 5-year period began with the first distribution and ran until the end of the 5th year. The tax court agreed – the 5-year period closes at the end of the 5 years beginning with the first distribution, and does not end on the date of the 5th annual distribution. Arnold v. Comm., 111 TC No. 12 (1998).
Arnold did what you would like to do. If possible, use any other funds available (or borrow some) to avoid taking any additional withdrawals from your SEPP prior to the end of the 5th year.
2017-06-10 16:00, By: Gfw, IP: [216.80.120.234]

L4: 72 t, 5 years, additional withdrawal at 60Thank you all for your thoughtful and helpful insights!2017-06-10 19:31, By: scott, IP: [70.187.156.145]