Additional check received after setting up 72t account
L1: Additional check received after setting up 72t account I retired effective June 2008 (at 55 yrs old) and received my lump sum payout that summer, which I rolled over to CD accounts at a local bank. I set up a 72t account beginning January 2009. I just recently received an additionalcheck from Fidelity, who handles the distribution of retirement monies from my former employer, AT&T.
I called Fidelity to ask what the check was for and was told that it was for”additional monies” due to a “final calculation”. The check is made out tomy local bankforthe benefit of (FBO) – myself. I do not want to alteror changeanything with my 72t account, as I know allabout the severe consequences. What, inyour opinion, should I do with this check? Can I roll it over into a small savings account, separate from the 72t account?The check shows a description of “taxable” so I’m sure the IRS will see a statement down the road… Thank-you!
2009-10-09 17:55, By: Jan, IP: [18.104.22.168]
L2: Additional check received after setting up 72t accountHave the check deposited into a separate IRA account, and it will not be part of your SEPP plan. I assume these other CD accounts are IRA CDs, and if they are in separate account numbers, your SEPP universe consists of all those accounts that you used to establish your initial account balance. But the latest check should be kept out of these IRAs and therefore your current SEPP, as indicated.You would report the all the plan distributions on line 16a of Form 1040, with -0- on 16b and “Rollover” next to 16b.The IRA distributions will be reported on lines 15a and 15b, and 15a must exactly total your 72t annual distribution. If your first check from the IRA(s) was in January, you must distribute 100% of your 72t distribution by the end of the year. CDs can be very cumbersome in 72t plans if they are not laddered or structured to expire and free up the funds to satisfy your 72t distribution without taking an early withdrawal penalty from the bank on the CD.I would also mention that since you separated at age 55, a 72t plan may not even have been necessary if your employer plan was able to offer flexible distributions. If so these payments would be penalty free under the age 55 separation exception, when taken directly from the plan. Once these funds are rolled to an IRA, you must use the 72t plan to eliminate the penalty.Note: If this check is so small that you do not want to open a separate IRA, you could cash it as a taxable distribution. There should be no penalty due to the age 55 separation.2009-10-09 19:28, By: Alan S., IP: [22.214.171.124]