Date Change

L1: Date ChangeHello-
My question is in regards to changing the actual date of the monthly withdrawal. An example of this would be changing from the first of the month to the 5th of each month or vise versa. Every financial institution that I deal with (except one company) has no problem with changing the date by a few days. Most companies always double check that we have not doubled up payments in one month. Otherwise, there is not a concern with making this adjustment.
This issue has risen because for instance, a client”s funds are notrolled overinto their IRA until the 5th of the month after they retire. We begin the 72(t) withdrawal on the 5th day (when we receive the funds). However,the client does not want to receive his/her payments on that specific date. They would prefer to receive their money on the 1st of the following month and the 1st thereafter. My office then requests the date to be changed to the desired date.
Do you know if this is a problem?If not, are there any IRS private letter rulings that address this specific issue. I have neverhad a company not honor our request to process the change until very recent.
Thank you in advance for you help with this issue
Kim2008-01-18 12:48, By: kimcimm, IP: [66.78.69.231]

L2: Date ChangeThe date of the monthly distribnution, or changing the monthly date isn”t important. Just make sure that between 01/01 and 12/31 the sum of the distributions (whenever taken during the year) add up to 1 annual distribution.2008-01-18 13:11, By: Gfw, IP: [74.136.102.241]

L2: Date ChangeDo you know of any IRS document that references this issue? I have to provide this info to a financial institution that does not agree with your position.
Thank you!Kim2008-01-18 13:51, By: kimcimm, IP: [66.78.69.231]

L2: Date ChangeMy firstsuggestion isto find a financial institution that understandsIRC Section 72(t) as it relates to SEPP plans – I really don”t think that the one your are working with does.
Thisquestion comes up periodically – start with a review of 72(t)(2)(A)(iv) – it talks about not less frequently than annual. Then browse Notice 89-25which definedqualifying distribution as annual and finally review Rev.Rul. 2002-62 which definesqualifying distributions as annual. After reviewing the above, you may also want to purchase Bill Stecker”s book which is about the best source ofwritten information onSEPP plans.
Before you do all that, you may want to ask the financial institution for documentation that legitimizes what they are telling you.
There have been a variety of PLRs on both monthly and annual distributions, but the bottom line is thatit is the annual distribution that counts and even that can be taken at any time during the year as long as it is between 01/01 and 12/31.
2008-01-18 14:15, By: Gfw, IP: [74.136.102.241]

L2: Date ChangeKim,
I can”t quote any IRS regs, but I can tell you that I just changed my semi-annual payment plan where I was paid on 3/30 and 9/30 each year to a monthly one at Schwab, and I chose the 5th of the month in January for the change, and they had no problem with new frequency and no problem with the new date each month. Their main concern was that the total I was paid for the year remained the same. In another 72t I have running at Vanguard, I asked for 5th of month payments from the outset, and told them to pay the first “five months” in May 2007, and then switch to the regular monthly payments beginning on June 5th, and they paid the “May payment” in mid May after getting the account set up for 72t, and then started June on time and didn”t blink either.
Gordon is correct– the main issue is to make sure you get exactly the total gross paid out during the calendar year that your plan calls for. One more thought about the 1st of the month for a payment date… I stayed away from it, since I was worried that the bank might do the transfer early in a month whenthe 1st was a holiday, which could cause the JANUARY payment to be issued on Dec 31st, making the annual payment total wrong with no way to “fix it”.That is why I like the 5th of the month.KEN2008-01-18 14:23, By: Ken, IP: [75.67.65.254]

L2: Date ChangeHello kimcimm:
The answer lies directly in the Internal Revenue Code; specifically, IRC 408(d)(2)(B) says: “…for purposes of applying 72 to any amount…all distributions during any taxable year shall be treated as 1 distribution…”.
This means that all 365 days in the calendar year are fungible / treated as the same. Further, if you think about it, it is this section of the code that causes hte 1099R to be an annual dcoument with no supporting detail to the taxpayer or the IRS.

TheBadger
wjstecker@wispertel.net
2008-01-18 14:40, By: TheBadger, IP: [72.42.66.180]

L2: Date ChangeI agree with all that has been said. I am VERY familiar with the process/rules. I have eventalked with the author of the last revenue ruling regarding the 72(t) on other issues I was having with firms notknowing the details and processes. Where I am at right now is…the one financial institution thatI am having problemswith states “our position is we will not change the date.” I will be contacting their legal team to ask them for their specific reasoning. From here on out we may need to stop doing business with this firm. Any help I can get with this would be great…several months ago the same company was miscalculating the withdrawals and they still argued with me.
Thank you!
Kim2008-01-18 15:18, By: kimcimm, IP: [66.78.69.231]

L2: Date ChangeTheir 2WRONGS should direct you RIGHT out of their door. From postings on this forum, Vanguard seems to understand SEPP 72-T plans, and possibly better than any other firm.2008-01-18 17:51, By: dlzallestaxes, IP: [141.151.90.106]

L2: Date ChangeKim:
Life is too short to argue with custodians. Fire them and move to a new custodian who understands what”s going on with 72(t) and 72(q).
Convince your client to stick with the 5th day of the month for distributions to avoid distribution problems. Some custodians will advance distributions when the 1st falls on a weekend or holiday. You can count of January 1st to be a holiday and you don”t want the first distribution in January of the new year to be accelerated and fall in December of the previous year. That would give you an automatic “bust” of the plan because you have taken out too much money.
Jim2008-01-21 09:15, By: Jim, IP: [24.252.195.14]