Annual Recalculation

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L1: Annual RecalculationI plan to start my SEPP this month and have a question on recalculation method.
I will use the amortization method and calculate payments based on the 12/31/2004 balance in the IRA.
Can I decide at the end of this year if I will recalculate every year that payments are required? I realize that once I start the recalculation, it must be continued. However, I guess I do have the option to begin recalculation or continue with the set payments.
Also, if I do recalculate, could the 12/31/2005 balance be used?
Thanks
2005-05-02 11:38, By: Gary T, IP: [24.145.164.87]

L2: Annual RecalculationMake sure that you read Bill’s post on re-calculation. With that said, re-calculation is established at the time the plan is implemented. Some IRA Trustee/Custodians may want to see the plan’s assumptions or they may only offer a code other than ‘2’. Either way, you should keep good documentation regarding the design and operation of the plan.
The magic to the 2nd year is only that it is the 1st time the re-calculation is visible.2005-05-02 16:20, By: Gfw, IP: [172.16.1.70]

L2: Annual RecalculationGordon:
My IRA custodian had numerous restrictions on the SEPP options including requiring that if multiple accounts were used for the calculation, then funds must be withdrawn from each account. As you know, many times it has been indicated that if multiple accounts were used as a basis for the calculation, the withdrawal could only come from one account.
So, I am going to do my own calculation and withdraw the amounts as an early distribution. I wil then file Form 5329 to avoid the penalty. Since all documentation will be prepared and maintained by myself, don’t I have the option of deciding on the annual recalculation at the end of this year?
2005-05-02 17:25, By: Gary T, IP: [24.145.164.87]

L2: Annual RecalculationThe thing to remember is that re-calculation should be determined when the plan is initially designed, not at the end of the second year. It’s only at the end of the second year whether the re-calculation is visible or not.
If the IRA Trustee/Custodian is provided with the plan assumptions when the plan is initiated and re-calculation occurs without being implemented in the plan, you will probably receive a code of 1′ and you’ll have to file form 5329. If you don’t document the plan initially and then do the re-calculation, the same thing will probably happen.
Either way, you may have to explain and document the plan to an IRS reviewer. 2005-05-03 04:38, By: Gfw, IP: [172.16.1.70]

L2: Annual RecalculationGordon:
Thanks for the reply. Because of the reasons I previously advised, my custodian will code the withdrawals a code ” 1 “. I have not documented anything with the custodian and I realize I will have to file Form 5329. The custodian does not know these withdrawals have been calculated to comply with the SEPP requirements.
Regardless of the documentation I maintain, I still think I can decide at the end of this year whether I will recalculate or not. I am not required to provide anything to the IRS now concerning my plan, am I ?
2005-05-03 07:02, By: Gary T, IP: [24.145.164.87]

L2: Annual RecalculationActually, you never have to provide information to the IRS unless they ask. Good luck! 2005-05-03 07:21, By: Gfw, IP: [172.16.7.101]