L1: 72t error
New client had 72t running for 4 years, former B/D and Advisor admitted to mistake distributing too many payments last year, too late for B/D to fix with 1099 correction. B/D will pay client IRS penalty amount to compensate for error, (anticipating IRS
audit, thus will report it now). Client will pay IRS the penalty on all funds w/d thus far 4years. Can she continue the current 72t program and currentmonthly payment? The problem is, if not, the lower balance cannot give her enough monthly if she has to
start a new 72t payment.
Please advise, Jackson
2011-08-04 19:15, By: Jackson, IP: [220.127.116.11]
L2: 72t error
If she busted the plan, than the plan no longer exists. If she starts a new plan, it has to be based on current age, account balance and interest rate.
I hope the BD will also be paying the interest on past due penalties – if they are admiting fault, then they should pay both penalties and interest.
You may also want to refer to this article…http://72t.net/Articles/Articleshow.aspx?WA=870e2089-7523-49e3-8252-b2e2df8cf6ae
2011-08-04 19:37, By: Gfw, IP: [18.104.22.168]
L3: 72t error
Assume that taxpayer withdrew $ 25,000 for 4 years = $ 100,000. Her penalty will be $ 10,000 which is what the B/D should be held responsible for, PLUS interest, not just $ 2,500 ( 10% of last $ 25,000).
HOWEVER, the IRS has been lenient and cooperative in allowing the extra distribution by the B/D fiduciaryto be repaid as soon as it is discovered,and the penalty waived, and the “busted” plan allowed to stay intact.
HAve your tax practitioner contact ” PRACTITIONER PRIORITY SERVICES” (PPS) or “TAXPAYER ADVOCATE SERVICES” (TAS) to see if they will help in this situation. Get B/D’s admission of responsibility for the error IN WRITING, so it can be sent to IRS.
2011-08-04 19:51, By: dlzallestaxes, IP: [22.214.171.124]