End of 72t
L1: End of 72tI have two IRA accounts that I have been taking 72t distributions since age 50. I take the distribution from one account in January and the other account in May. I turned 59 1/2 on April 6th. I’ve taken my January distribution from the one account. Do I need to take the 72t distribution in May from the other account as usual or am I now free to do as I please with that account. My financial institution has told me that anything taken from that account this year will be coded with a “7” as a normal distribution.
John2014-04-24 23:04, By: jopizz, IP: [126.96.36.199]
L2: End of 72tTypically in the last year of an age 59.5 plan – the year that you turn age 59.5 – you would take: 1) an annual distribution; 2) no distribution; or 3) a partial distribution based on the number of months in the year leading up to age 59.5. 2014-04-25 13:46, By: Gfw, IP: [188.8.131.52]
L3: End of 72tSo if I understand you correctly I should still take the 72t amount this year rather than take slightly more or slightly less.
John2014-04-25 15:08, By: jopizz, IP: [184.108.40.206]
L4: End of 72tNot necessarily. It depends on your cash needs, and your 2014 tax situation.
It’s called “planning” and analysis.2014-04-25 15:33, By: dlzallestaxes, IP: [220.127.116.11]
L5: End of 72tMy 72t amount from that account is 13,321. I had just planned on rounding it off to 14K.
John2014-04-25 15:40, By: jopizz, IP: [18.104.22.168]
L6: End of 72tRe-Read gfw’s response. Before 59 1/2, your only options are -0-, full annual distribution, or the equivalent of 4 monthly payments. After 59 1/2, you can take -0-, or any amount that you want to because THE PLAN WILL BE OVER !!!2014-04-25 15:44, By: dlzallestaxes, IP: [22.214.171.124]
L7: End of 72tThanks. I misunderstood what he meant by annual distribution.
John2014-04-25 15:50, By: jopizz, IP: [126.96.36.199]
L8: End of 72tI am concerned from your original post that there might be a serious problem here. It is not clear whether you have two separate 72t plans or just one plan enveloping two IRA accounts. Either way, since you have now passed 59.5 these plans have ended (unless one or both plans were started less than 5 years ago. Since the plans have terminated you no longer can take distributions to change the amount of your final year distribution. As indicated by gfw you have 3 choices for 2014, ie take nothing, take out the full annual or take out 3 months worth, but any of these 3 options had to be completed by the date you turned 59.5. Anything you do now will not affect your plan, but will affect your taxes if you take additional distributions.
Exception: If you found out you took out too much prior to 4/6, and you have a distribution that is still under 60 days, you could roll the excess amount back to the IRA. You can only do this once every 12 months per IRA account (and that rule has been changed by the IRS starting next January as well).
2014-04-26 03:21, By: Alan S, IP: [188.8.131.52]
L9: End of 72tYou raise an interesting point that all of us may have missed.
You said that you take your annual distribution from 2 IRAs, one in Jan and the other May 1.
You are more than 60 days past the Jan distribution, but I doubt that exceeded your annual distribution. I’ll assume for discussion purposes that you took half from each account. I think that you MIGHT have a significant problem.
Your plan terminated 4/6/2014 when you became 59 1/2. Your options, per gfw, were valid only thru 4/6. You took something, and cannot repay it. You could have taken 100% of your annual distribution, but you didn’t do that, because you normally also had a 5/1 distribution. That would have left only the prorated distribution of 4/12ths of the annual distribution by 4/6/2014. You might have lucked out if your Jan distribution was only 1/2 of the May 1 distributions, i.e. Jan = 1/3 of your annual.
Your only options at this point would be to repay the excess over 4/12ths of your annual IMMEDIATELY, and wait to see if IRS ever audits you, or pay to get a PLR ( Private Letter Ruling) which costs $ 10,000 to the IRS, plus $ 7,500 to $ 10,000 for professional representation, which is probably impractical. However, technically you have busted your plan, and will owe the 10% penalty on the cumulative total of all of your distributions since you started 9 1/2 years ago.
2014-04-26 15:37, By: dlzallestaxes, IP: [184.108.40.206]
L10: End of 72tMaybe you misunderstood my original post. I have two IRA accounts and two separate 72t’s set up. The accounts are completely independent of each other. I took my annual 72t distribution from account A in January. My question was do I need to take my annual 72t distribution from account B since I am past 59 1/2.
John2014-04-26 18:56, By: jopizz, IP: [220.127.116.11]
L11: End of 72tThen you are ok. You took a 2014 distribution from the first one, even though you didn’t have to, and you haven’t taken anything from the 2nd one, and don’t have to, but you can take any amount you want from that 2nd one.
I think you confused all of us, but, no harm, no foul.2014-04-26 19:07, By: dlzallestaxes, IP: [18.104.22.168]
L11: End of 72tI agree with dlz. As long as the plans are totally separate and independent, there is no reason that you could not use a different final year option for each plan. Since one of the options is a full annual payment and another of the options is to take no distribution at all prior to the plan ending date you should be OK, and do not need to take a distribution from Plan B. Any distribution taken after turning 59.5 has absolutely no affect on either plan, so if you don’t need the money there is no reason to take more distributions now.2014-04-27 04:01, By: Alan S, IP: [22.214.171.124]
L12: End of 72tThanks for the replies. That was the answer I was looking for.
John2014-04-27 14:17, By: jopizz, IP: [126.96.36.199]