L1: 72TI have been on a 72T plan since 2001 and my money ran out 2009. The last money in the fund was $25,000 and I used it to pay off my home. Ihave ask and no one seems to be able to give an answer. If I do not have anything in the fund do I have a tax liablity? Hope someone can help.2010-10-14 21:16, By: Carm, IP: [18.104.22.168]
L2: 72TShort answer – NO.
I’m sorry to hear that you drained your account but running out of money while taking SEPP Plan distributions does not make you “bust” the plan. No penalty will be assessed in your situation.
I’ll let DLZ or GFW address the mechanics of how you deal with the IRS when your IRS Form 1099-Rshows a difference from your nowmal, compliant distributions in prior years.
Jim2010-10-14 21:23, By: Jim, IP: [22.214.171.124]
L2: 72TAnother answer… Maybe. More information please.
What was the amount of the scheduled annual distribution when you took out the $25,000? If it was less than the $25,000 you took out, you may have busted the plan and you will owe penalties and past due interest back to 2001.2010-10-14 21:52, By: Gfw, IP: [126.96.36.199]
L3: 72TGFW is correct. You do not “bust” a SEPP 72-T plan if you take out LESS than the required annual distribution because your last distributions takes the balance to -0-. The IRS will not penalize you for running out of money. I guess they reason thatyour poor investment performance is penalty enough.
But, as GFW stated, you mistakenly took out the entire balance to pay your debts, and it exceeded for the calendar year your required annual total, you have “busted” your plan. UNLESS part of the distributions that you made during that final calendar year might have qualified under some other provision as an exception to the 10% penalty.2010-10-14 23:14, By: dlzallestaxes, IP: [188.8.131.52]
L3: 72TThe amount was $39,600.2010-10-14 23:54, By: CARM, IP: [184.108.40.206]
L3: 72TNot sure if you got the answer $396002010-10-14 23:55, By: CARM, IP: [220.127.116.11]
L4: 72TIf you were scheduled to take out $39,600 anf there was only the $25,000 left that you took out, you have no problems running the account to zero. Just keep the documents showing the balance before and after the last distribution.
Rev. Rul. 2002-62 Section 2.03(a)…Complete depletion of assets. If, as a result of following an acceptable method of determining substantially equal periodic payments, an individual’s assets in an individual account plan or an IRA are exhausted, the individual will not be subject to additional income tax under 72(t)(1) as a result of not receiving substantially equal periodic payments and the resulting cessation of payments will not be treated as a modification of the series of payments. 2010-10-15 00:22, By: gfw, IP: [18.104.22.168]
Thanks for catching the “$25,000” issue. I completely read over it and did not take it into account when I wrote my answer.
Jim2010-10-15 13:36, By: Jim, IP: [22.214.171.124]