72t SEPP

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L1: 72t SEPPcan you clarify a few things for me:
the 72T SEPP rule is that the distrubtion has to be based on each IRA, so you cannot use a total dollar amount of all iras for the calc, and then distribute that equal payment calculated from just one of the IRA plans that can satisy that distribution?

why am I getting different SEPP figures for different calculators used, is your site, which I was referred to by the IRS, considered to be the expert?

thankyou2007-07-12 08:37, By: nancy, IP: [159.53.78.144]

L2: 72t SEPPHello Nancy:
It appears that you have received some incorrect information.
It is perfectly acceptable to group your IRAs together; thus increasing the summed principal balance and base the computation of the annual distribution amount based on that sum. Then, you may make that annual distribution from any or all of the IRAs included.
Take the most complex situation; you have six IRAs. You may logically group 1,3, & 5 together to compute the annual distribution to the exclusion of 2, 4 & 6. Then, you may take that annual distribution from 1, 3 and 5 in proportion that meets your needs. However, distributions may not be taken from 2,4, or 6.
The most common reason you might get a different computation at a different website/calculator is you migth be putting in monthly or quarterly distribution frequency and that calculator is picking up a slightly different interest rate and using slightly different mathematics.
Thebadger
wjstecker@wispertel.net

2007-07-12 10:43, By: TheBadger, IP: [72.42.67.26]

L2: 72t SEPPThe first step is to identify which IRA accounts you want to be in your SEPP “universe”, that is those that you will base your calculation on. If you have enough funds, it is advised that you have another IRA account that is NOT part of your SEPP calculation to use for emergency needs.
Once you have identified the accounts to be included and/or partitioned your accounts using the reverse calculation to see what account balance is needed to generate the distributions you need, then you have the option of satisfying that distribution amount in any combination from any of the accounts in the SEPP universe. It is fairly common to have 3 or 4 accounts included in the initial calculation, but the distribution is taken from only one of them. Having these various combinations further decreases the chances of getting the IRA custodian to provide you with the exception coding on the 1099R. If you happen to have different beneficiaries on the accounts in your SEPP universe, be careful not to use a joint calculation that does not reflect the actual account beneficiary. In that event you would need a separate calculation on each account and then add up the results instead of adding up the balances first and doing a combined calculation.
This site is considered the leader in providing comprehensive information of all aspects of the plan even though you can find calculators at any number of financial sites, mutual fund companies, etc. I cannot speculate why you would come up with a different figure other than rounding differences, if you are positive that your entries are correct.
2007-07-12 10:53, By: Alan S., IP: [24.116.66.98]

L2: 72t SEPPNancy:
If you will be dealing with several different custodians for your SEPP universe, don”t be surprised when they insist on treating each account as a complete 72(t) plan. Let”s say your SEPP universe consists of4 separate accounts at 4 different custodians and you only plan to withdraw from 2 of the accounts. If you tell the custodians that you are doing a 72(t), one or more of the custodians may insist that the account they have must make distributions based on the amount of the account they hold, and not include the values of the other accounts. As far and the IRS is concerned, you”re OK. Butsome of the custodians have interpreted Rev Ruling 2002-62 in such a way that each account is a complete entity and not part of the larger universe.
Check with the custodians to see how they interprete things. I guess this is one good reason to haveall early distributions coded “1” and let the taxpayer file Form 5329 to claim the exception.
Jim 2007-07-12 11:10, By: Jim, IP: [24.252.195.14]

L2: 72t SEPPAssuming that all of the IRAs were of the same type, whether Roth or traditional, would it not be simpler to combine the IRAs into a single IRA account and then do the SEPP? It seems to me that it would, since it would be easier to spot distribution errors on 1 account than on 1 of several.
Yes, a separate IRA could be kept in reserve, if necessary. In my case, it was not necessary since I also had invested in a taxable mutual fund account for a number of years and it serves as my emergency pot of money… with no 10% penalty and a long term capital gains tax rate for anyearnings distributed.
When I did my SEPP calculations, I used the SEPP brochure from Vanguard, which walks their clients through the calculations with clarity. Once I had that number, I did the same calculation on this web site, using one of the in-house calculators. The annual distribution numbers differed by about $0.50, which I took to be the same number given that these calculators used different numbers of digits, rounding, etc.
Ed
2007-07-12 20:54, By: Ed_B, IP: [67.170.159.37]