72t distribution error
L1: 72t distribution errorA couple of weeks ago, there was a distribution sent to a client for $10,000 more than his established SEPP amount. Client normally takes $50,000 per year, but we did distribution for $60,000. Advise? Can they put the money back in and put a letter of explanation in file – or – explain on a Form 5329 when doing their taxes in 2010?2009-04-16 18:33, By: KWS, IP: [188.8.131.52]
L2: 72t distribution errorThey can repay it within 60 days to correct the error, especially since it was the error of the financial institution. Only the net distribution should show on the 1099-R, and the 5329 would not be needed just because of the overpayment/repayment, but rather for the coding itself.2009-04-16 21:16, By: dlzallestaxes, IP: [184.108.40.206]
L3: 72t distribution errorDespite the error, the 1099R should still report the full 60,000, and a 5498 would report the roll back contribution. If the 10,000 is rolled back within 60 days, report the rollover on line 15b of Form 1040, and the taxable amount will be reduced to the 50,000 (unless the IRA has basis). This should cause no problem with the 72t plan, and should not change the 1099R coding from what would normally be issued. If it does, the 5329 can be added to claim the exception.
The only problem here would occur if there was no longer a rollover available. If that is the case, better let us know.2009-04-16 23:02, By: Alan S., IP: [220.127.116.11]
L4: 72t distribution errorNo other rollovers – so we’re good to go.Really appreciate your wisdom and advise – both of you. Thanks.2009-04-17 01:11, By: kws, IP: [18.104.22.168]