Ending a 72t
L1: Ending a 72tMy birthday is 12-4-57, I have getting distributions on my 72t for 10 yrs at $12,000 per year. I will be 59 1/2 on 6-4-17. I normally get my monthly payment on the 15th of the month. I wish to make a change to my monthly distribution. Do I have to take $6000 by 6-4 to satisfy my 72t obligation. Thanks
2016-04-18 21:52, By: Bill, IP: [220.127.116.11]
L2: Ending a 72tYou can change your distribution pattern anytime. For 2016 you just need to distribute 12,000 by year end for the entire year. For 2017, you have the choice to distribute nothing, 5,000 before 6/4 or the full annual by 6/4. You do not have to take a distribution for June, 2017 if you pro rate your annual amount of 12,000.2016-04-18 23:50, By: Alan S, IP: [18.104.22.168]
L3: Ending a 72tMy plan is to take $5000 before 6/4/17. Then take $1000 in Dec/17 for the holiday. In 2018 I will set up a new distribution plan. That should work?2016-04-19 12:00, By: Bill, IP: [22.214.171.124]
L4: Ending a 72tAfter 6/4 your plan has ended and you can take distributions without restriction or penalty since you will be over 59.5. You will get a separate 1099R for the Dec distribution since Box 7 will contain code 7. If you have to file a 5329 do not include the Dec distribution on the 5329 since code 7 indicates a penalty free normal distribution. Any new distribution plan you set up after the 72t plan ends is totally unrelated to your 72t plan and without restriction, so this would work fine.2016-04-19 17:25, By: Alan S, IP: [126.96.36.199]
L5: Ending a 72tThank You Alan. Is there an IRS publication that explains the correct measures to take when ending a 72t. Thanks again!2016-04-19 21:51, By: Bill, IP: [188.8.131.52]
L6: Ending a 72tThere is very little IRS material regarding much of the technical detail of 72t plans. That is why there is a need for a site like this. Much IRS guidance is indirect, by way of several years of private letter rulings, and even these are often not consistent with other letter rulings. We also get feedback on what issues the IRS has raised when taxpayers post their questions here.
There is no formal documentation needed to end your plan. Once you reach the modification date for your plan (longer of 5 years or age 59.5), the plan automatically ends but your tax return does not indicate that. If you have been filing a 5329 to claim the penalty exception, that will stop once the 1099R forms coded 1 for early distributions stops. The only other way it ends is when the taxpayer busts the plan and then owes retroactive penalty and interest.
2016-04-19 22:24, By: Alan S, IP: [184.108.40.206]
L7: Ending a 72tI have time before I will have to worry about this, but does tax software, like turbo tax or tax act, properly walk you through completing your final year of 72(t) distributions?2016-04-20 04:58, By: brkr12002, IP: [220.127.116.11]
L8: Ending a 72tNO. Even the more expensive professional tax software, like CCH PRO FX, doesn’t guide you thru the process. And unfortunately, most tax practitioners do not have a clue about the nuances of SEPP 72-T, nor about the process at and after 59 1/2.
Neither tax software nor most tax practitioners have any idea about NUA (Net Unrealized Appreciation of Employer Stock in 401-K’s and other Employer Retirement Plans) either.2016-04-20 06:49, By: dlzallestaxes, IP: [18.104.22.168]
L9: Ending a 72tThanks, that was what I was thinking.2016-04-20 17:02, By: brkr12002, IP: [22.214.171.124]