L1: Fees?I take it that mutual fund internal fees/costs/dividends etc. have no bearing on busting a 72t plan… only distributions to the payee? For example, a custodial fee of $15 is charged annually to my IRA. I receive a letter stating I can mail in a check or let the fee be paid from the fund. Does either option come into play for a 72t?2013-12-05 11:54, By: Perfectionist, IP: [188.8.131.52]
L2: Fees?I believe that if you deposit a check into your SEPP 72-T IRA account it will be treated as a contribution, and therefore bust your plan. Send in a check from another checking account to pay the fee.2013-12-06 01:19, By: dlzallestaxes, IP: [184.108.40.206]
L2: Fees?Custodian fees can be taken out of your IRA balance by the custodian without busting your SEPP plan. If you purchase mutual funds or stocks and a fee is charged (taken from your account by the custodian) for the purchase, that is also acceptable. Custodians canoffer the option of paying their fees fromyour own money outside the IRA accountif you choose, and either way is not a problem, but by letting them take the fees from your SEPP plan IRA balance, it is paid with your money that (in most cases) has never been taxed, which is a small savings over paying it with after tax money.2013-12-06 04:24, By: Ken, IP: [220.127.116.11]
L2: Fees?Double check with your custodian. Where I work, if someone mails in a check to cover the fee, it does not trigger a contribution showing on the form 5498, they really just show a line item on the account history $15 in, $15 out custodial fee. Also, them pulling it from the balance does not trigger a 1099. But I would check with your particular company to be safe how they code mailing in the $15 check. Back office personnel does screw up a lot and can accidentally count a check received as a contribution. I would also call their customer service after the annual fee is mailed in or deducted just to double check that they are showing it correctly.2013-12-06 16:09, By: brkr12002, IP: [18.104.22.168]
L3: Fees?Annual custodian fees should not cause any problem with a SEPP plan whether taken from the account value or paid by separate check.
Historically all annual custodial fees were simply taken from the account value each year. This fee has generally ranged from $5 to $35 and in some cases $50. I think it was in the 1990’s the IRS began requiring IRA custodians to bill the fee separately so the participant would have the option to pay it outside of the IRA account.
Why this option you ask? If the annual custodian fee is paidoutside of the IRA, the fee becomes adeductible miscellaneous item on the tax return. Unless the taxpayer has a large amount of other such deductions, the small IRA custodial fee is really an immaterial item.
So the bottom line is that unless you have a lot of qualifying miscellaneous deductions to add to this fee, you are probably better off letting them simply deduct it from the account value. This will avoid the very real possibility of the person processing your fee check as a contribution, which then opens a whole new can of worms.
Jim F2014-03-02 19:47, By: Jim F, IP: [22.214.171.124]
L4: Fees?It’s a small insignificant financial matter. However, as was stated, if you do not itemize deductions, or if your miscellaneous deductions do not exceed 2% of your income, then there is no deduction if paid from outside the retirement account. However, if paid by the retirement account, then this will eventually save about 25% of the fees because that is the amount that it would have been taxed at if that fee amount was still in the account when you are taking distributions, or your beneficiaries are taking the distributions when the account is ultimately closed out, and less money is left because fees were paid from the account. If you assume that they deducted $ 50/year for 30 years, that was $ 1,500, and that would mean $ 375 in taxes saved eventually.2014-03-02 23:12, By: DLZALLESTAXES, IP: [126.96.36.199]