Delayed Calculation

You are here:
< Back

L1: Delayed CalculationExisting plan
DOB: 7/16/1956
First distribution: 8/1/2012
The client made a 72T calculation in 2012 and began payments. The calculation was determined as an annual payment of $12,001. The distribution paperwork that was submitted had a typo (IRA Owner’s Error)and has been distributing $10,001 instead. Upon review of the calculation that was made for $12,001, the wrong age and allowable rate were used so neither amounts are allowable by the IRS.
If the client is able to correct the age and lower the interest rate significantly (0.06%)to the point where the amount currently being sent falls within the IRS’ 72T parameters, will the IRS honor the caclulation even though it was not determined before payments started? Or is the client to show proof of correct calc before plan starts?
2014-02-25 22:00, By: MikeyT, IP: []

L2: Delayed CalculationMy non-legal, non-accountant (common sense) view of this is if a SEPP calculation can be done using the correct age for year 2012 payments, the correct beginning balance, and an interest rate can be determined (that is not higher than the max allowable one from the posted Gov’tfigure for 1 or 2 months prior to first payment), while arriving at an annual figure of $10,001 it should be viewed as a valid SEPP payment amount. That calculation should be kept in hard copy printout in case anyone ever questionshow theannual amount was computed. jmho2014-02-27 15:21, By: Ken, IP: []

L3: Delayed CalculationAs an accountant, that’s the most practical, and least costly solution.2014-02-27 15:45, By: dlzallestaxes, IP: []

L4: Delayed CalculationBetter check with client how he is getting along with 2,000 less than he expected, because if this could result in needing additional funds in the next 3.5 years client may end up busting the plan anyway. And if that appears likely, best to bust it as of 12/31/2013 and start a new plan 1/1/2014.2014-02-27 16:32, By: Alan S, IP: []

L5: Delayed CalculationI agree with Alan S and I also think that the plan is already busted. There is no option – legal or otherwise – that allows a recalculation to overcome what would normally be considered plain stupidity.
I also don’t like advice given on this forum that appears to encourage tax evasion. Changing the assumptions isn’t tax avoidance in my opinion, it is tax evasion. The error was made – maybe it would be best to accept and live with it – personal responsibility trumps all.2014-02-27 19:50, By: Gfw, IP: []