L1: End SEPPStarted SEPP in 3/01 and will be 59.5 on 2/28/10. I have taken equal monthly payments since the start in 2001. Is there any written documentation on how to handle the year in which one turns 59.5? I would prefer to take no distribution in Jan and Feb but dont want to make a mistake at this point. Once my SEPP ends I will not be taken any distributions from this IRA till I am 62 so wont have to worry about two 1099’s in 2010 if I must take Jan and Feb distributions. I have seen posts saying one of my options would be no distribution at all in 2010but want to be 100% certainafterhaving no issues for over 8 years. Thank you very much2009-08-26 00:37, By: Ed, IP: [126.96.36.199]
L2: End SEPPYou have 3 choices :
1. 2/12 of your annual distribution.
2. 100% of your annual distribution.
Starting in March, or April, you can take any amount or -0-, whatever you need, or depending upon your financial and tax situation.
If you don’t think that you can trust the expertise exhibited on this website, then why would you ask for it, but I’m sure you can find a tax attorney who will be happy to take a couple thousand dollars to tell you the same thing.
By the way, before an operation, do you ask a doctor for the research and statistics, as well as his success record too ?
GFW is probably the leading authority in the country on SEPP 72-T plans. Others have years of experience and expertise as well. No one here has any financial interest, nor is selling you anything.2009-08-26 03:25, By: dlzallestaxes, IP: [188.8.131.52]
L3: End SEPPAt this point, you would probably feel much safer just taking the two payments for Jan and Feb 2010, and if you don’t end up needing the money in those months, set it aside after getting it, and it will lessen a “post SEPP” withdrawal amount from your IRA later in the same calendar year or a future year.Why worry yourself at this point. KEN2009-08-26 04:38, By: Ken, IP: [184.108.40.206]
L4: End SEPPThere was a thread about this same issue about a month ago where someone asked about documentation about these 3 options. No one was able to produce any letter or revenue rulings, but it has been posted for several years by Bill Stecker andGFW that these 3 options were valid, ie. the IRS has not busted any plans for using any of these options in the final stub year as long as at least 5 years of total dollar distributions had been distributed. I know that this is not particularly comforting for all those with their entire SEPP plan distribution totalat stake being the final stub year, but that is the best we have to go on.
In Ed’s case here, I am not even sure that two monthly distributions are one of the options. He turns 59.5 in February, 2010 and that would indicate that January was the only monthly distribution required using the pro rate method. January is the final month prior to turning 59.5. The same rationale would apply if 5 years was the modifying date, since the 60 months would be completed in the month prior to the initial distribution month.
One factor that is reassuring is that the IRS does not have a history of busting plans in the final stub year based on technical issues if the distributions are not illogically unequal, such as taking more than the annual amount prior to the modification date. Since there is even some minor risk in taking either one or two months worth next year, Ed might just as well take nothing, since that appears to be what he prefers. There will then be no 1099R, but the IRS should not be looking for one either.2009-08-26 04:54, By: Alan S., IP: [220.127.116.11]
L2: End SEPPGentlemen thank you for your response. DLZ I never suggested anyone was trying to sell me something. I have used and trusted this site since 2001 and read discussion forum almost daily.One of the many things it has taught me is to “Document” everything. With that in mine if there was some guidelines in writing I would have liked to have kept it with my records. Was just asking not a matter of distrust. Since IRS wont be looking for a 1099 net year I think I will skip all distributions in 2010. Dont want to have a 1099 with a code 2 and another with a code 7. Just trying to end my SEPP worry free, Again my many thanks for all your help thru the years.2009-08-26 13:03, By: Ed, IP: [18.104.22.168]
L3: End SEPPEd:
Thank you for your many insightful and well written comments over the years. You have added much to the success of this web site and we appreciate your inputs.
Jim2009-08-26 13:38, By: Jim, IP: [22.214.171.124]
L3: End SEPPBased on a 03/01 start date, you have already exceeded the 5 years as outlined in “(c) Section 72(t)(4) provides that if the series of substantially equal periodic payments that is otherwise excepted from the 10-percent tax is subsequently modified (other than by reason of death or disability) within a 5-year period beginning on the date of the first payment, or, if later, age 59 1/2, the exception to the 10-percent tax does not apply, and the taxpayer’s tax for the year of modification shall be increased by an amount which, but for the exception, would have been imposed, plus interest for the deferral period.” And after 03/01/2001 you will be over age 59.5… “72(t)(2)(A)(i) made on or after the date on which the employee attains age 591/2 “You really don’t have to take anything in 2010 since you have met both the5 year and age 59.5 requirement.2009-08-26 14:59, By: Gfw, IP: [126.96.36.199]
L4: End SEPPAs we said, your decision of taking, or not taking, distributions in 2010 should be based upon your financial and tax situations. There is no SEPP 72-T requirement, and you should not be concerned about 2 1099-Rs ( if you take distributions before AND AFTER 3/1/2010), 1 form ( with a code 1 or 2 depending upon when you take any distributions), or NO 1099-R ( if you do not take any distributions).
The IRS never tracks 1099-Rs (or any 1099s) based upon the previous year. They only look for income to be reported when a distribution is reported on a 1099-R ( or any other 1099).2009-08-26 15:55, By: dlzallestaxes, IP: [188.8.131.52]