72t and social security disabiltiy
L1: 72t and social security disabiltiy
My client is currrently receiving 72t payments for 14 months (and is under age 591/2)- he just qualified and started receiving social security disabiltiy payments. Can he stop his 72t payments with out being penalized.
2011-09-12 21:10, By: Stingy, IP: [18.104.22.168]
L2: 72t and social security disabiltiy
From our FAQ…
Q. What is the Definition of Disability for 72(t)??
A.The definition of disability can be found in IRC Section 72(m)(7). In one case,Dwyer v. Comm.,106 TC No. 18 (1996), the Tax Court agreed with the IRS and stated…
For purposes of this rule, an individual is considered disabled if “he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result
in death or to be of long-continued and infinite duration.” The Code specifies that an individual must be able to furnish proof of his disability in whatever form and manner that the Service may require. The court noted that the regulations under Section 72
also state that an impairment that is remediable does not constitute a disability.
In short… the definition for a SEPP plan is similar to, but slightly different than, the definition used by the SSA. The SSA granting disability should be all the proof needed.
2011-09-12 21:22, By: Gfw, IP: [22.214.171.124]
L3: 72t and social security disabiltiy
I believe that the SSA and IRS definitions of “disability” are different. I believe that SSA pays disability if you are unable to perform “your occupation”, while IRS is “any occupation”. There are also similar differences as far as “disability insurance
benefits”, which may differ from either of these, so do not assume that qualification for any of these will satisfy the others.
2011-09-12 21:51, By: dlzallestaxes, IP: [126.96.36.199]
L4: 72t and social security disabiltiy
I have to remember back to when I used to have the exact definition as part of a sales presentation, but (red color and underlining added)…
The Social Security Act defines disability (for adults) as “inability to engage in
any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or expected to last for a continuous period of not less than 12 months” (Section 223 [d]). Amendments to the Act in 1967 further specified that an individual’s
physical and mental impairment(s) must be “. . . of such severity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage
in any other kind of substantial gainful work which exists in the national economy, regardless of whether such work exists in the immediate area in which he lives, or whether a specific job vacancy exists for him, or whether he would be hired if he applied
for work” (Section 223 and 1614 of the Act). SSA disability programs only pay for total disability and not partial or short term disability.
The SSA definition is actually a lot more stringent than the definition for a SEPP. The existance of a job anywhere in the national economy is the real kicker. Based on the definition, almost anyone not on their death bed could be denied benefits.
2011-09-12 22:03, By: Gfw, IP: [188.8.131.52]
L5: 72t and social security disabiltiy
Theoretically, all these rulings and definitions are loaded with words that are subject to case by case interpretation by courts and the IRS. For example, the 72(m) definition appears to be more stringent in at least one casedue to use of the word “remediable”.
Many surgical procedures could result in remediation, but not necessarily within 12 months under which an SSD award could be made.
To get to the point, I agree that despite the subjective differences that may exist, if you have an SSD award, you are probably over 99% safe in ending your 72t plan. Since 72t plans are calendar year based, if your 1099R is coded “3” because you supplied
documentation to the IRA custodian, or if you have theevidence to override it with an “03” on Form 5329 as of the end of the calendar year, you should be OK. While I believe that the vast majority of these awards are retroactive for periods well in excess
of a year due to the length of SSD determination time, be sure that the effective date is prior to the date that you exceed your 72t annual distribution amount.
With an SSD award, you might also be able to recover penalties due to busting a plan in a prior year, since the award MIGHT be effective back to the date the plan was busted in such prior year.
2011-09-12 22:38, By: Alan S., IP: [184.108.40.206]