busting a 72t
L1: busting a 72tI have been in a SEPP 72t for 20 months and draw my allotment from two IRA’s if I drew too much from 1 of my IRA’s will I be penalized on all the funds I have drawn out. If this has busted my 72t is there any way to fix it or will I have to pay penalties on all the funds I take out.2010-03-02 14:47, By: buzzles, IP: [188.8.131.52]
L2: busting a 72tPlease give a few details like dates and when the withdrawals occurred, the amounts that should have been taken and the amounts that were taken.2010-03-02 14:57, By: Gfw, IP: [184.108.40.206]
L3: busting a 72tI started withdrawing in july 2008 from both IRA’s I was taking 4.14% annually equalling 24208 but january 2009i took and additional 12000 from one acct. leaving the other the same as in the begining. I now have withdrawn 52468 combined from both acct. with anopther 8096 still left this year before july.2010-03-02 15:15, By: buzzles, IP: [220.127.116.11]
L4: busting a 72tLet’s start at the beginning. In July 2008, the 120% mid-term rate was 4.14%, but none of the three allowable methods of distribution would have generated a distribution of 4.14% – if I am reading your post right, you have had a busted SEPP from the start.
Assuming that you misstated your distribution amount and both IRA accounts were part on teh SEPP, if you took out more than the annual amount allowed then you also bust the plan. If 24,208 (and I’m not saying that it is) was the annual distribution, then you have over drawn by 40,260 – depending on whether any previous rollovers were used and the times period that has occurred from the date of the distributions, you may be eligible to roll back the $40,260.
As it stands right now, you would owe the 10% penalty of the total amount taken from the two IRA accounts since July 2008 with interest on the 10% due on the 2008 penalties.
If my assumptions are right, you need to see competent advice from a CPA familiar with SEPP plans.
2010-03-02 15:48, By: Gfw, IP: [18.104.22.168]
L5: busting a 72tI am confussed based on the sepp calculator a combined total of 402200 would create the 24208 annual disbursement which i figure would amount to 40347 for the 20 months. I guess in any case I am in trouble with the plan. any monies I now withdraw are now subject to the penalty i believe.2010-03-02 16:14, By: buzzles, IP: [22.214.171.124]
L6: busting a 72tYou don’t give enough information to give you a reasonable answer – but, if you busted the plan, then you owe the penalty on all previous distributions, not just future withdrawals.
If you used our calculator and used a 4.14% interest rate for the calculation, then your distribition was not 4.14% as you originally stated – you merely used a 4.14% interest rate to calculate the distribution.
>>which i figure would amount to 40347 for the 20 monthsI do not understand this comment at all. If the plan is suppose to generate an annual distribution of $24,208, then in each year of the plan you may take $24,208 – no more and no less. SEPP plans run on a calendar year. 2010-03-02 16:25, By: Gfw, IP: [126.96.36.199]
L7: busting a 72tIF (a big if) your correct annual distribution from one of both of these IRA accounts is 24,208, then:1) In 2008, you could have withdrawn 10,087 (5 months)or 24,208.2) In 2009, you must have withdrawn 24,208 and that is what your 1099R forms should total.3) In 2010, you need to withdraw 24,208 in total, whether taken monthly, quarterly or randomly. It appears that 2009 might have been the year the plan was busted what with an extra 12,000. As stated above, your total for the year must be 24,208 (IF that number is correct).If you indeed did bust the plan in 2009, you can report it busted on your 2009 tax return and start a new plan this year if you wish, but you need to get some help to better understand these plan before starting another one.2010-03-03 03:28, By: Alan S., IP: [188.8.131.52]
L8: busting a 72twith a busted 72t will i have to pay the 10% penalty after I turn 59and 1/2. i know i have to pay on the monies i receive before that.2010-03-04 22:06, By: buzzles, IP: [184.108.40.206]
L9: busting a 72tNo, you would not be penalized on distributions made on or after age 59.5, which may be a reason to postpone 72t distributions you must take in the year you turn 59.5 until after the date you reach 59.5.That way, even if your plan is busted, less dollars will be subject to the retroactive penalty. To be clear, if you bust your plan before the modification date (the longer of 5 years or reaching 59.5), but after you reach 59.5, you will cause only the distributions taken prior to age 59.5 to be subject to the penalty.BUT – are you totally sure you have a busted plan?2010-03-04 22:43, By: Alan S., IP: [220.127.116.11]
L10: busting a 72tYes the plan is busted if i stop taking monies now will I only pay the penalty on what i have taken thus far.2010-03-09 14:43, By: buzzles, IP: [18.104.22.168]
L11: busting a 72tYour punctuation, or lack thereof, makes it difficult to understand what you are saying.If you stopped taking monthly distributions, that is not a problem, so long as you “catch up” by 12/31 so that you have the correct ANNUAL distribution.If you stopped distributions, and do not plan to take any more, and the amount you took already is less, or more, than the annual amount, then this busts the plan, and you are subject to 10% on cumulative distributions from the beginning thru the bust date. If you are planning to start another plan during 2010, why not see if you can just catch up to make the correct annual distribution for 2010 ?Please stop trying to save words, and explain yourself more fully as to what you have done, and what you want to do.2010-03-09 15:12, By: dlzallestaxes, IP: [22.214.171.124]
L12: busting a 72tBuzzles,I think we are all wondering if we have the specifics of your situation to determine if/how you busted the plan. Can you fill us in on the following:What did the 1099-R(s) amount to ($$) for 2008?What did the 1099-R(s) amount to ($$) for 2009?Was your first payment received in July 2008? If not, when?Did you use the Mid Term Rate of 4.14% in your calcs? If not, what rate? (BTW- that rate was the published for July ’08 and could not be used until plans that started in Aug or Sept 2008)What was your age on 12/31/2008?Was the combined beginning IRA balance used the calcs $402,200 and what was the dateof thatbalance?How much have you taken out so far in 2010?***************************It appears from boththe interest rate used, and the extra $12,000 withdrawn you have busted the SEPP, but by knowing all of the facts, we may see other problems with how you did this, beyond those two potential game busters, so we can point them out in an effort to show you that you really need professional help before you try another SEPP plan.By the way, on Nov 24, 2009, I responded to both of your posts, on the subject of somehow taking extra money out of your IRA, and perhaps if you had alsoasked what the penalties would have been if you took out the extra money, we (others answered as well to one of your posts) would have answered that question as well, so you had an idea of what damage you might do.Ken2010-03-09 15:27, By: Ken, IP: [126.96.36.199]