Curent 72(t) client, now on disability

L1: Curent 72(t) client, now on disabilityI have a client who has been receiving 72(t) distributions from their IRA. They are 53 years old and have be put on total disability. They have started to receive SS disability payments. Can they change their SEPP due to the disability and not subject their past and future SEPP to the 10% pre-59 1/2 penalty ???
Thanks,
Randy Day2006-09-27 08:47, By: Randy, IP: [64.186.203.22]

L2: Curent 72(t) client, now on disabilityHello Randy:
Short answer — YES. IRC 72t)(4) which imposes the retroactive 10% surtax has two exceptions — death & disability.
TheBadger
wjstecker@wispertel.net

2006-09-27 09:08, By: TheBadger, IP: [72.42.67.125]

L2: Curent 72(t) client, now on disabilityRandy. How about a favor.
I assume that you will be notifying the IRA custodian of the new, disabilitystatus of your client so they can note the date of change from 72(t)-type distributions to disability-type distributions. Also I assume (and TheBadger or GFW can probably clarify this point) the IRA custodian will issue your client two separate Form 1099-R”s for this year; one for the 72(t) exception and one for the disability exception.
Now for the favor. Keep us posted on what happens as to the custodian”s actions or reactions, and what Form 1099-R”s your client receives next year. I have a similar situation developing with one of my clients, and since you are further along with this process, your first-hand account of what happens will be valuable and much appreciated.
Thanks.
Jim2006-09-27 09:52, By: Jim, IP: [70.184.2.72]

L2: Curent 72(t) client, now on disabilityI think a major problem in this situation is that how one IRA custodian reacts will not be at all predictive on how the next one will react. But as in other SEPP related situtions, it seems the approach should be to attempt to get the custodian to code and structure the 1099R forms to produce the least potential for IRS inquiry, but to also have a detailed documentation system to present to the IRS should the inquiry come. And, if it comes, it will probably be several months after the fact when the detail will be much more difficult to reconstruct.2006-09-27 22:53, By: Alan S., IP: [24.116.68.91]