Failure to make a final distribution in Dec 06

L1: Failure to make a final distribution in Dec 06
I am a financial advisor and have many clients using the SEPP(premature exceptionT 71). I am wondering if anyone has the experience of forgetting to make a final or any of their SEPP distributions for a calander year.In this case, long story short,I forgot to make a final distribution of approx. $37K. Its my understanding that in theory my client will now have to pay a 10% penalty on every distribution(approx $444K!) for the last six years.
Of course I am hoping that there will be some form of lieniency for my mistake. Any person”s experience good or bad would be appreciated. Sincerely,”StressedOut”Advisor2007-01-08 10:06, By: Fred, IP: [67.88.171.242]

L2: Failure to make a final distribution in Dec 06Hi Fred:
The first thing I would suggest is to notify your E&O Insurance carrier either through your B/Dor directly if you function as an indipendent RIA without a B/D. This one is probably going to cost you some cash.
The second thing for you to dois to contact TheBadger, aka, Bill Stecker, for assistance putting together a request for exception with the IRS. I”m sure he will probably be commenting on this situation.I feel sure that if anything can be done in your favor thathe can be of assistance. Unfortunatelyyou might not get the answer you want.
Good luck.
Jim2007-01-08 11:13, By: Jim, IP: [70.184.2.72]

L2: Failure to make a final distribution in Dec 06I agree with Jim, and hopefully TheBadger will post to this, and possibly try to handicap the prospects of obtaining a PLR with a similar outcome to that of PLR 2005 03036.
Based on the data you posted on the other site, the final stub year for this 72t is 2007, since that is when client turns 59.5 and the 5 year requirement was satisfied in 2005. Therefore, the 2006 problem remains as you described, except that the downside also includes interest on top of the 44,400. 2007-01-08 13:51, By: Alan S., IP: [24.116.66.98]

L2: Failure to make a final distribution in Dec 06
Thanks for the help I have sent Bill a direct email. Hope he can help2007-01-08 14:06, By: fred, IP: [67.88.171.242]

L2: Failure to make a final distribution in Dec 06Identical problem here. My husband turned 59 1/2 in Feb 2006. We said hoorah! We don”t have to make a 72T withdrawel anymore. He e-mailed the IRS about a month ago and got a response the day before yesterday – he was concerned that we needed to make a withdrawel based on the Feb. 2006 date (aproximately 5 weeks into 2006). The response was that we had to make a withdrawel for the FULL YEAR that he turned 59 1/2!!!!!!!!!!!!!!
We potentiallyface dire circumstances financially with this issue!!!!!!!!!!!! My husband called the IRS today and was told verbally that actually the e-mail information was wrong…that he only had to withdraw for 5 years. This is confusing because we read “59 1/2 years oldor 5 years – whichever is longer”.
What with the possiblity of penalty we are desparate – any advise would be greatly appreciated.
Who is Bill Stecker? Might he help us?
PLEASE!!!2007-01-10 08:24, By: Very stressed out, IP: [72.54.146.242]

L3: Failure to make a final distribution in Dec 06Very Stessed Out,
Check ARLO”s posting on 10/18/2006, titled “DOUBLE CHECK FINAL DISTRIBUTION” and look for Bill Stecker”s reply (The Badger) which should answer your question about final year of 72(t) plan withdrawal requirements. Change the forum view at top to 5 months and change to “view ALL” to get there more quickly. KEN2007-01-11 16:38, By: KEN, IP: [151.199.20.45]

L3: Failure to make a final distribution in Dec 06Ken, thanks for the reply…
My husband is similar but…it is exactly as follows:
1st distribution was a partial distribution in year 1999 late in the year (prorated) age was 54 (birth date 8/11/46)
the next6 years full distributions were done (2000 – 2005)
these distributionswere all single annual withdrawals each year
turned 59 1/2 in February 2006
did NOT make a 2006 withdrawal
Are we in trouble?2007-01-11 17:43, By: very stressed out, IP: [68.219.164.41]

L2: Failure to make a final distribution in Dec 06Dear Stressed Out:
Calm down. I don”t think we have suffered any heart attacks on this board, and this is not a time to start. But please provide a little more information as you may not have a problem.
What is the date of your first distribution under the SEPP Plan?
Now go to the calculators at the top of the page and calculate the Last Payment Date to determine when your SEPP Plan actually terminates. If you started distributions before age 54 1/2, then you probably don”t have a problem. If the age was older, you still may not have a problem, but the calculator with help determine this.
Bill Stecker, aka TheBadger, is a CPA in Denver who is recognized as a 72(t) expert. He is responsible for many of the PLR”s dealing with this subject. If you need some help, he will probably be able to work with you to resolve the problem. Understand that “resolution” might not be in your favor, but atleast he can help you work with the IRS. I suspect he will make a response, asuming he”s not temporarily stuck in another Denver blizzard.
Jim2007-01-10 09:34, By: Jim, IP: [70.184.2.72]

L2: Failure to make a final distribution in Dec 06Thanks for the reply!
The calculator provides 2/11/06 as the end date. But what does this mean? Is there no withdrawal requirement for 2006? Is a prorated withdrawal required?Or is the entire amount required for the year 2006 and it is the last required withdrawal? This is the crux of the question.
The withdrawal has been done on an annual basis each year.
Thanks for your help!!2007-01-10 12:14, By: Very Stresses out, IP: [72.54.146.242]

L2: Failure to make a final distribution in Dec 06The “stub” year question comes up again! One of the experts that frequents this group needs to write a FAQ to address this in detail. I”m not one of the experts but I”ll offer the following to help get further down the path to an answer. I think that what you are required to withdraw in 2007 will depend on your previous years withdrawals, especially the first year you started (the complete calender years in between the partial first and partial last year should all be equal amounts regardless of the frequency of distribution.).
My SEPP started in June (7distributions that year)and has had monthly withdrawals ever since the start. In 2008 (the year my plan ends) I will take 5 monthly payments (meeting the 5 year requirement and I am already past age 59 1/2), or,in that yearI could elect to take one payment (I assume preferably before June for correctness) that would equal the 5 monthly payments.2007-01-10 12:42, By: John, IP: [71.208.232.16]

L2: Failure to make a final distribution in Dec 06I have an interesting variation on this problem. I was to make a 72t withdrawal in 2006 as as part of a final year”s distribution. At the end of the year, because I wastransferring my IRA account between custodians- which took much longer than it should have – the actual withdrawal didn”t occur until the first week of January at the new bank. I have learned (unfortunately) that the 1099 for the withdrawal will reflect 2007 not 2006.
I guess I”m at a loss at what to do now. I am in jeopardy certainly. Should I report the withdrawal amount in 2006 anyway and attach a statement to the IRS explaining the circumstances? That, to me, would appear to be a good-faith effort at doing what I was requred to do. If not, what should I do? I would appreciate some guideance here.2007-01-10 13:14, By: bart, IP: [66.150.62.145]

L2: Failure to make a final distribution in Dec 06Fred, does your client know of the situation and for this discussion can you tell us what your particular practice area is?
Joel2007-01-10 13:55, By: Joel, IP: [24.187.32.203]

L2: Failure to make a final distribution in Dec 06Fred: I”m going to assume that your are a commissioned salesperson masquerading as a “financial advisor”. You apparently have too much on your plate. Your lifestyle depends on making your next sale, not by making sure your “old” clients are complying with Code section 72t regs. If this profile does not fit please do not take offense because the public at large MUST be aware of all of the other “Freds” out therethat live by the salestalk: “yea we can do that…we”ll make sure its done”2007-01-11 10:52, By: Joel, IP: [24.187.32.203]

L2: Failure to make a final distribution in Dec 06Just a note about the slow transfering of funds between custodians. I have three different custodians and have moved money multiple times. I always request the funds are wired (yes, it cost money) and the documents are overnited (cost money too) if possible. I have had transfers take as little as 4 business days. Also follow up with the custodians to be sure there are no problems. – Don2007-01-11 11:34, By: dond, IP: [24.32.37.113]

L2: Failure to make a final distribution in Dec 06Dear Very Stressed Out,
GO back in the forum to a posting by ARLO on 10-18-2006. I think it is titled DOUBLE CHECKING FINAL DISTRIBUTION. One reply is from Bill Stecker (The Badger) and it should answer your question once you apply your facts to his list of requirements. To get to that older posting, change the number of months viewed from 3 to 5 andselect the VIEW ALL check mark button on left side below the # of months, then hit enter and let it reload all of thoseposting subjects. Then use page down or the down arrow to get back to that date. It shd help you. KEN2007-01-11 16:52, By: KEN, IP: [151.199.20.45]