I am concerned about a 72t related answer I received from my custodian
L1: I am concerned about a 72t related answer I received from my custodianMy DOB is 1-20-56. I started a 72t with my custodian 5 years ago, and received my first distribution on June 9, 2011. I received 7 distributions in 2011, 12 in 2012 through 2015 (48 total distributions), and have now received 5 in 2016 (on May 9th). This equals 60 distributions and yet, my custodian say I will receive one more distribution on June 9th, 2016.
Will this extra distribution cause a problem with my IRS compliance, and therefore receive a 10% penalty? I have questioned it with my custodian and they say they are correct.2016-05-10 15:54, By: bimmer84, IP: [18.104.22.168]
L2: I am concerned about a 72t related answer I received from my custodianYou reach the 5 year mark on 6/9/2016 and you were age 59.5 on 7/20/2015. Your 1st modification date is 6/10/2016.
I don’t know why they want to give you the 61st payment, but I really don’t think it will cause any issues.
Since they are stating that they have to make the payment, I would get something in writing from them outlining that the payment will not create a modification of the plan. Either that, or try to have the payment made to you on 6/10.
Someone may disagree, but I don’t think you have any issues.
2016-05-10 19:34, By: Gfw, IP: [22.214.171.124]
L3: I am concerned about a 72t related answer I received from my custodianThanks for the quick and helpful reply, Gfw. I apologize if I am being dense, but wouldn’t I reach the 5 year mark on 5/9/16? That’s when the 60th monthly payment was made. Or maybe that is splitting hairs that don’t need to be split.
I have learned more since my first post. If I understand the situation correctly, the very first payment on 6/9/2011 is outside the boundaries that were established for the 72t. Maybe that means the payment is outside of the boundaries of the plan? That first June payment was adjusted in some manner and carries code 2 so it did show up on 1099-R reporting. I checked all of my 1099-R’s and they all add up to May 9th being the 60th payment. So, if a June 9th payment is “required”, maybe that is to establish 60 payments inside the boundaries?
I think it comes down to whether an additional payment causes an issue. In the following reference from the IRS it suggests that payments must continue “at least” for five full years. The phrase “at least” to me suggests bare minimums, without suggesting an exact maximum. In another reference it said you could continue on, or stop, or change the amount after the minimums are reached.
From an IRS document:
“When do I fulfill my obligation to take substantially equal periodic payments? The substantially equal periodic payments must generally continue at least five full years, or if later, until age 59 1/2.”2016-05-10 20:37, By: bimmer84, IP: [126.96.36.199]
L4: I am concerned about a 72t related answer I received from my custodian>>wouldn’t I reach the 5 year mark on 5/9/16? That’s when the 60th monthly payment was made
Dates are very important… especially the date of the 1st SEPP payment to you.
No, the 5 year period ends 365 days x 5 years plus a few days for any leap years after the date of the 1st SEPP payment – that means that 6/9 is the end, not 5/9. The end date really has nothing to do with when the last payment was made. Check out last payment calculator.
Now… if the first payment wasn’t made on 6/9 and the first SEPP payment was made on 7/9, then the 5 year period would end on 7/9 and that would be the reason for the payment to you on 6/9.2016-05-10 20:57, By: Gfw, IP: [188.8.131.52]