L1: IRAWith my IRA my question is can i open up a 72T and than separately take out for higher education meaning two different things without being penalized by the IRS.2009-03-12 05:00, By: J, IP: [188.8.131.52]
L2: IRAOnce a SEPP plan is established, the only exceptions are death and disability – educational withdrawals are not an exception.
Best suggestion is to segregate into a new IRA the funds that will be used for education – these funds would not be part of the SEPP and could not be used in determining the SEPP distribution.2009-03-12 11:07, By: Gfw, IP: [184.108.40.206]
L3: IRALet me restate the question, I have four IRAs in one account can i have two in SEPP and use another for higher education ? Is that what you mean by segregation?2009-03-12 18:51, By: J, IP: [220.127.116.11]
L4: IRAI think you mean that you have 4 accounts in your IRA. If so, you can use 1, 2, 3, or 4 of them to be the basis for your SEPP 72-T. You do noy have to use all of them, unless you need more than 1 to satisfy your withdrawal needs.
2009-03-12 19:24, By: dlzallestaxes, IP: [18.104.22.168]
L4: IRAYes, if all four IRAs have different account numbers.
You could then use two (or three) of the accountsto determine the SEPP distributions and the non-SEPP accounts for other distributions. 2009-03-13 11:28, By: Gfw, IP: [22.214.171.124]
Unless you have other funds available to pay the tax due on your educational withdrawal, be sure to have enough in that IRA account to fund both the schooling and the taxes.2009-03-13 17:00, By: Ed_B, IP: [126.96.36.199]
L6: IRAMy wife is saying she read that since she has an IRA ,that if she has a 72t open that she cannot use any other money in that IRA that is not in the 72t for higher education. Is this true?2009-03-26 15:10, By: J, IP: [188.8.131.52]
She is correct – the only exceptions are death and disability.
While there is a education exception to the 10% penalty, it does not apply to an IRA used to fund a SEPP.2009-03-26 15:37, By: Gfw, IP: [184.108.40.206]
L8: IRAEven if the IRA has different account numbers?2009-03-26 15:56, By: J, IP: [220.127.116.11]
L9: IRAJ: All of the responses you have received are correct but I’m not sure you have understood what they are saying. I’m going to takeyour firstthree comments and respond to each.I hope this clears up your questions.
1. With my IRA my question is can i open up a 72T and than separately take out for higher education meaning two different things without being penalized by the IRS.
A SEPP Plan, aka 72(t), may consist of one or more separate accounts each with individual account numbers to construct a SEPP Plan Universe. Once you have constructed your SEPP Plan Universe and calculated your annual, SEPP Plan distribution amount and made your initial distribution, then you are restricted to only taking the calculated distribution amount from this plan _ no more and no less for any reason, except for death or disability.
2. Let me restate the question, I have four IRAs in one account can i have two in SEPP and use another for higher education? Is that what you mean by segregation?
Short answer is yesÛ but your statement needs some clarification. When you state that you have four IRA’s in one account,Û this is an impossible situation. You may have 4 mutual funds in one IRA account, or your may have 4 separate IRA accounts with one custodian, but you can’t have 4 IRA’s under 1 account number. I’ll address this question after # 3 below since both appear to be essentially the same questions.
3. My wife is saying she read that since she has an IRA, that if she has a 72t open that she cannot use any other money in that IRA that is not in the 72t for higher education. Is this true?
Decide which IRA accounts you need to construct your SEPP Plan Universe. For example if you need the total amount from two IRA’s for the universe and if you can combine one into the other so you only have one IRA account for your SEPP Plan, you will solve a lot of potential problems down the road. But it’s OK to have two (or more) separate IRA accounts in your universe from which you will take 72(t) distributions and nothing else!
Now you are free to take distributions from your other IRA accounts for higher education expenses without penalty. You could also takedistributions not covered byany early distirbution penalty exceptionfrom the non-SEPP Plan universe that would not affect your SEPP Plan distribution.
J, I hope this clears up things for you and your wife. Good luck.
Jim 2009-03-26 16:06, By: Jim, IP: [18.104.22.168]
L9: IRAAny IRA that was used to form the SEPP (included in the SEPP universe)cannot be used for other exceptions. Whenthe annual distributionfrom the SEPP was initially determined,accountsnot included as part of the SEPP could be used.Just make sure that you have clear documentation as to which accounts were included and which were excluded.2009-03-26 16:10, By: Gfw, IP: [22.214.171.124]