Custodian refuses to continue 72t payments
L1: Custodian refuses to continue 72t paymentsFollowing up on my withdrawal made in error from 72t, I planned to return the exact amount I withdrew in mid- April, 2008 to myIRA account that I had beenusing for the 72t withdrawals for the past 3 years. This would be a rollover of the funds I withdrew in error and isallowable because I have not ever had any rolloverson this account. I posted to the discussion forum on 5/22/08, but somehow my response is not posting, so I am sending a new message.
When I attempted to return the rollover to the broker, I was informed that yes, I could rollover the amount I had withdrawn, but the broker is refusing to continue my 72t payments as they do not want to get involved with the IRS and I have to fend for myself. The broker will allow me to continue to receive the payments, but as normal distributions.In the meantime after the withdrawal in error, in May, the broker sent me the monthly payment (I have been drawing monthly) as a 72t payment and by doing so, I am now over my allowable withdrawal amount for the 72t for 2008 by about $1600.
I now am looking for alternatives and am still trying to resolve the situation with the broker. Needless to say, I have not returned anything to the broker until I decide what to do. I don”t want to wait until the last minute, but have 3 weeks to straighten this mess out.2008-05-28 12:11, By: mgd, IP: [22.214.171.124]
L2: Custodian refuses to continue 72t paymentsSince most IRA custodians are now refusing to “underwrite” the validity of a SEPP plan and code the 1099R as early distributions, you might as well roll the excess funds back to the IRA without further delay and plan to file a 5329 claiming your exception. This should not result in a red flag since most SEPP recipients are having to do it.
That said, you will have to report the rollover on lines 15a and 15b of your Form 1040. If your IRA is fully taxable (no basis), that means that line 15a will show x 1,600, and 15b will show only x (the correct SEPP amount) and “rollover” will be entered next to 15b.
That said, you must now be very careful because you will have used up your only permitted rollover for 12 months running. Being careful also means triple checking your annual total so that the amount you roll back is correct. In addition, you have to exist another 7 months with no more distributions which will take some serious budgeting. Filing the 5329 is very easy, just report the code for a SEPP which is “02”.2008-05-28 17:28, By: Alan S., IP: [126.96.36.199]