Begin SEPP in 2010 Made Contribution in 2009

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L1: Begin SEPP in 2010 Made Contribution in 2009Apologies as I’m sure this has been covered before, but I’ve searched the site and message board, unfortunately to no avail.I made an allowable contribution to my IRA in 2009. I am now contemplating beginning a SEPP in 2010. Q: Will my 2009 IRA contribution bedisallowed?The reason I ask is that in my research on 72(t)’s, I came across a few websites that mentioned this as a “Caveat,” but then never provided any details.Thank you.2010-04-28 15:31, By: Mark, IP: []
L2: Begin SEPP in 2010 Made Contribution in 2009It isn’t a rule/caveat that I have ever heard of … you just have to make sure that once you start the SEPP you make no more contributions into the IRA accounts that make up your SEPP.
If you are just starting, make sure that you check out our Planning Pointers page.2010-04-28 15:38, By: Gfw, IP: []

L2: Begin SEPP in 2010 Made Contribution in 2009Mark:Unless there is some really obscure rule for IRA’s, and I don’t think there are any to apply in your case, then you are clear to start a SEPP Plan in 2010. 2009 contributions are closed since tax filing date (04-15-2010) is behind us. The only problem I could forsee is if any or all of your 2009 IRA contribution would be disallowed for some reason and you had to remove it after you started SEPP distributions.If fact you could make your 2010 IRA contribution now and begin a SEPP Plan as soon as the money shows up in your account.Jim2010-04-28 15:40, By: Jim, IP: []

L3: Begin SEPP in 2010 Made Contribution in 2009Thanks GFP and Jim! That was my read on it also, but wanted to make sure.2010-04-28 16:13, By: Mark, IP: []

L4: Begin SEPP in 2010 Made Contribution in 2009There is no way your IRA contribution would be disallowed related to the SEPP. I suspect the caveat you referenced may have to do with the possibility that your IRA contribution was an excess contribution, and you therefore had to remove it to avoid continued 6% excise taxes.If it turned out that you could not deduct the contribution, you could always leave it in the IRA and file an 8606 to report the contribution as non deductible. But if you had no earned income and the contribution was therefore excess regardless of deductibility, you would have to remove it this year. That would create a separate 1099R with a corrective distribution coding on it in addition to the 1099R for your SEPP distributions. That would produce the dilemma ofdetermining the IRS reaction whether you included that distribution as part of your SEPP distributions or whether you should not. I am not aware of the IRS clarifying this issue to date and therefore it is best to avoid the possibility of an excess contribution muddying your SEPP plan.2010-04-28 20:50, By: Alan S., IP: []

L5: Begin SEPP in 2010 Made Contribution in 2009Thanks all. I agree with all the responses. I believethe blurb I remember seeing on some tax expert’s site that was labelled “Caveat” should have been in the context of starting a New IRA in year one and then taking the money out the next year. However, it didn’t go into any type of detail or state the context and was down on the bottom of the page. If I remember correctly, it simply said something like “… be careful… if you put money in one year, you can’t take it out the next.” Unfortunately, I haven’t been able to find the site again. It was just something that my old brain remembered reading a few months ago and I wanted to cross it off my list before I started a SEPP as I didn’t see anything anywhere in the code or the pubscame anywhere close to implying or stating that a prior year contribution could be disallowed due to starting a SEPP. My old accounting/tax skills are long gone as I gave it up for investment banking back in the early 90’s.Thanks again for the confirmation.2010-04-29 22:23, By: Mark, IP: []