Going to start a 72t in febuary 2011, what does irs penalty 3.00% mean? What are the ramifactions of adding your spouse for the 72t?
2012-01-06 17:44, By: Bobby, IP: [220.127.116.11]
You mean Feb, 2012? 3% is probably the current IRS interest rate for underpayment of taxes. That would only come into play if you underpay current taxes or bust a72t plan and owe retroactive interest.
You cannot “add” a spouse. If your spouse has her own IRA account she could also execute a 72t plan, but it would be totally separate from yours. If you refer to “joint calculations”, you would generally avoid them because they
reduce your payout per year because of the longer assumed joint life expectancy. You would use individual calculation to get the higher payout, especially at today’s record low interest rates.
2012-01-06 18:41, By: Alan S., IP: [18.104.22.168]
Yes I do mean 2012, for the underpayment of taxes, does that mean if I owe IRS taxes at the end of the year?
2012-01-06 19:46, By: Bobby, IP: [22.214.171.124]
I do not know what you are talking about re 3% penalty.
However, there are several different penalties to be concerned about, or not to be concerned about re the first year.distributions from SEPP 72-T plans.
There is a 10% penalty on all cumulative distributions from SEPP 72-T plans if you bust the plan before the 5-year/59 1/2 minimum period.
There could be “underpayment/underestimate” penalties, but only if your withholdings and estimated payments are less than your prior year (2011) tax liability, and if your taxes went up. Talk to a tax professional about the “safe harbor” estimated tax provisions,
unless you believe that you can research this technical area yourself.
2012-01-06 22:03, By: dlzallestaxes, IP: [126.96.36.199]
Yes, but annual withholding or quarterly estimates must meet a safe harbor regardless of having a 72t plan. The 72t plan distributions will be taxable and along with your other income would increase your total taxes. If you are
not working or have another source of withholding you should plan on paying quarterly estimated taxes. While you can withhold from the 72t distributions, it is another moving part that could cause confusion. In any event, IRS interest is far less than the
If you busted the plan and owe the retroactive penalty and interest, the IRS probably uses the rate for each quarter since the plan began. 5 years ago the rates were higher than 3%, but it is this retroactive penalty that is
calculated by using several different quarterly rates. We do not know exactly how the IRS calculates the interest, but the goal of this site is to help avoid the penalty and therefore any interest. The IRS would have to calculate the exact amount of interest
and bill you if it came to that.
2012-01-06 22:07, By: Alan S., IP: [188.8.131.52]
Thank you for your response. I feel it will be helpful.
2012-01-07 01:40, By: Bobby, IP: [184.108.40.206]