IRA Transfer Question – 72t

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L1: IRA Transfer Question – 72t
Hey there…I transfers my current 72t plan to a different custodian….all went fine…first payment under new custodian came out no problem…now a lingering dividend from custodian #1 came over to custodian #2 and custodian #2 is saying plan is terminated…this
all happened within the month…We’re talking a $190 lingering transfer from custodian #1…This should be correctable right??

2011-09-27 18:05, By: Pete, IP: []

L2: IRA Transfer Question – 72t
Yes, assuming the dividend was moved by direct transfer (IRA to IRA), this would not be reported on a 1099R and is NOT a distribution. Therefore, you would not even have to change your distribution amounts or pattern because
of the transfer. As a non reportable transaction, the IRS will not even know about this unless they did a complete audit of your return.
The custodian’s contention that the plan is busted creates a concern that they do not know much about these plans. Granted, it is remotely possible that the IRS could decide to raise the issue of a partial transfer if they became
aware of this, but even that is flawed because you transferred 100% of the assets available at the times of the transfers.

Your plan is between you and the IRS. The custodian was probably going to code your 1099R with a “1” anyway, so their opinion can basically be ignored here. Just attach a 5329 with your return and apply exception code “02”.
2011-09-27 18:39, By: Alan S., IP: []

L3: IRA Transfer Question – 72t
Agreed….Just found out this small amount was actuall a partial month’s refund of mgmt fee….when the acct transferred, the next day, the mgmt fee was pro-rated and unused days were refunded back to me…actuall trasnferred (IRA to IRA) with the rest of
the money….

I think custodian #2 is being a little picky by saying this is a subsequent deposit to a 72t plan and therefore it’s terminated….thoughts??

2011-09-27 18:57, By: Pete, IP: []

L4: IRA Transfer Question – 72t
Ask them what they mean by busting the plan. They cannot do that legally. That is between you and the IRS. You will fill the 5329 to use the correct code regardless what code they use on the 1099-R.
If they are uncooperative, tell them you will transfer your account elsewhere, and will inform your tax and financial advisors that the firm does not understand SEPP 72-T plans. Who knows what else they do not understand ?
2011-09-27 20:41, By: dlzallestaxes, IP: []