L1: 72t code1I have been receiving equal annual payments for several years. I paid a penalty onan ’05withdrawal.My payment last year, which wiped out the funds, waswell short of the others. I am not yet 591/2. The 1099R codes it as a 1. The company said they coded it correctly because it was not anan amount substantially equal to the planned withdrawals. It was not their fault there was not enoughleft to make it equal. Do I have a course of action to avoid the penalty?I don’t know if it matters, but I have no taxable income.2009-03-14 13:40, By: db, IP: [220.127.116.11]
L2: 72t code1You have no problem because of the depletion ofassets. Rev. Rul. 2002-62 …
.03 Special rules. The special rules described below may be applicable. (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. 2009-03-14 16:22, By: Gfw, IP: [18.104.22.168]
L3: 72t code1You might point out the depletion rule to the custodian to see if they will revise the 1099R. But if not, just file a 5329 and claim the exception 02 on that form. Keep a copy of the -0- balance statement in the event the IRS requests further clarification.2009-03-14 18:57, By: Alan S., IP: [22.214.171.124]
L4: 72t code1DB,
When you paid an early IRA withdrawal penalty for2005, did that withdrawal involve money taken from an IRA that was part of your active 72t plan-the one that has justrun out of money, or had your 72t plan not started yet? I only ask because if it was from the 72t plan IRA(s) and that 72t planwas active when the extra money was taken out, then you may have busted the 72t at that point, and owe penalties on all other pre 59 1/2 withdrawals that you tookbefore and after, if they did not comprisea valid new 72t plan after the year when the penalty occurred. I guess what I am saying is if you took the extra money from your active 72t IRA “funds” in 2005, it probably “busted” your plan. If that withdrawal was not done with an IRA that was part of your 72t plan, or before the 72t plan started, then this warning does not apply. Let us know more details on when the 72t plan started, and the IRA(s) that made it up, v.s the IRA that was used for that extra withdrawal.
One more thing- Can you tell us the month and year when you received your first payment, and the initial balance in your IRA to compute your equal payments, the annual total payment you were taking in normal years on 72t plan, along with the age your attained in that first year of your plan, so we can check your math. It seems hard to imagine that the account ran out of money while on a 72t for only 5 years or so ( my interpretation of several years) unless a large withdrawal added to the problem of the declining market. KEN2009-03-14 22:34, By: Ken, IP: [126.96.36.199]