72(t) penalty for “bust”

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L1: 72(t) penalty for “bust”I am looking for clarification about the retroactive penalty when a SEPP is busted. Here is the situation…
Individual begins taking 10k per year starting in 2004 at age 58
Individual continues to take this amount each year without modification.
In 2007 at age 61 they bust the SEPP. In 2007, they would receive a 1099-R with a code 1 because of the modification.
I was always under the impression that because the SEPP was busted, the 10% penalty plus interest would be assessed on ALL previous distributions. However, it has come to my attention that this statement is incorrect. The 10% penalty plus interest would be assessed on only the payments while the individual was under age 59.5.
I am looking for any thoughts or references to this example elsewhere.
thanks all
2007-11-02 08:13, By: Aaron, IP: [12.20.48.10]

L2: 72(t) penalty for “bust”Hello Aaron:
You are essentially correct. Your individual would owe $1000 additional surtax for 2004 and likely $500 (or so) surtax for 2005 plus interest of $300 give or take.
See page 50 of publication 590; 3rd paragraph.
TheBadger
wjstecker@wispertel.net

2007-11-02 15:31, By: TheBadger, IP: [72.42.67.171]