Busted 72T

L1: Busted 72TWhat/when determines if a SEPP 72T is broken?
For example, if SEPP started Feb 2006 and monthly SEPP dist was $1000 – what would determine it was broken in Feb 2008?

2008-01-25 05:29, By: Nancy, IP: [68.57.60.119]

L2: Busted 72TWhen you set up a SEPP 72-T, you must segregate the IRA accounts that you are using as the basis for the ANNUAL distribution calculated, and the assumptions (i.e. interest rate) used in your calculation. The FIRST calendar year you have the option of taking that ANNUAL calculated amount in any way that you want (i.e. one lump sum at some time before 12/31, monthly, quarterly, etc. or in varying amounts), or taking a prorated amount based on the number of months.
For example, if your CALCULATED annual amount is $ 12,000, you must take either $ 12,000 during 2006 or $ 11,000 (11 months @ $ 1,000 based upon $ 12,000 annual/12 months=$ 1,000/mo x 11 months). If you had started in October, it would be $ 12,000 or $ 3,000 in 2006. In 2007 and all future years (except the final year), you must take $ 12,000 between 1/1 and 12/31 of each year regardless of how or when you take distributions, and regardless when you started the disributions from the plan. In an extreme case where someone needed $24,000 quickly near the end of a calendar year, they could take $12,000 late in the first year, and another $ 12,000 in January of the next year, but could not take any more money until January of each folowing year. If you take more, or less, than the calculated ANNUALdistribution, you “bust” the plan, and are subject to a 10% penalty retroactively on the cumulativetotal of all distributions since the beginning of the plan.2008-01-25 07:03, By: dlzallestaxes, IP: [141.151.95.57]

L3: Busted 72TIn previous example – SEPP started in Feb 2006…..$1000 dist each month…
May sound crazy, but how and when do I “break” the 72T? I will be 59 1/2 in April….I understand the 10% penalty but want to minimize my tax liability. And I need about $30K by May.
So, how and when could I break the 72T ?

2008-01-25 07:22, By: Nancy, IP: [68.57.60.119]

L3: Busted 72TApparently you did not plan far enough ahead when you started your SEPP 72-T. You should have considered the interplay between the 5-year period and reaching 59 1/2. Also, you should have kept part of your IRA separate from your SEPP 72-T IRA account(s).
If you have been taking distributions monthly, and want to accelerate the rest of the payments for the year, you can do that without becoming subject to the 10% penalty. But if you need to withdrawn monies in addition to your ANNUAL calculated total, then you will “bust” your plan, and be subject to the 10% penaltyretroactively on all cumulative distributions taken since the start of the plan, regardless how many years ago it started.2008-01-25 07:34, By: dlzallestaxes, IP: [141.151.95.57]