L1: IRS auditI am so confused about the 72t. I was just audited by irs because they said I did not meet any of the exception criteria. Iretired at age 51 in 2002. Irssaid I had to be at least 55 in order to avoid the 10% tax on the dividends I received from my investment in my ira. Agent said that because of the projected age chart for people under 55 I received t00 much money. They went back to 2006,2007 & 2008.I am not sure the ira agent knew what he was talking about. Please verify this for me2009-10-05 21:49, By: denny, IP: [220.127.116.11]
L2: IRS auditThe age 55 exemption only applies to employer sponsored plans, not IRAs.
You really need to provide additional information like
Your date of birth
The date of the first distribution.
The asset balance that you used to calculate the annual distribution.
The interest rate usedin the calculations.
The distribution method that you used in the calculations.
If you merely took the interest/dividends and did not use the sEPP exemption, you probably have a “big” problem and they will be looking at the 10% tax plus interest penalties from 2002 forward.
2009-10-05 22:46, By: Gfw, IP: [18.104.22.168]
L2: IRS auditWe need more info to determine if you in fact ever had a valid SEPP 72-T plan.
Date of Birth
Date and amount used for the IRA balance for your SEPP 72-T plan
Date of 1st Distribution
Interest rate Used in your Calculation
Annual Distribution(s) each year
Distribution in 1st calendar year (2002)
The IRS agent was wrong only if you had a valid plan, then no 10% penalty for distributions thru 59 1/2, not 55. If you did not have a valid plan, or “busted” your plan in any year, then you would owe a 10% penalty on ALL distributions starting in 2002.
You are wrong if you did not have a valid plan, or thought that you could distribute the earnings each year without having a calculated distribution amount based upon the formula.
Next time pay a professional to advise you, but since you are 58 now, I probably would not suggest starting a new plan correctly now since you can have unlimited flexibility with your distributions after 59 1/2, rather than locking yourself in for 5 years now.
P.S. If you never had a valid plan, you are lucky that the IRS agent only hit you for the 10% penalty for 2006, 2007, and 2008 distributions. He should have gone all the way back to 2002.2009-10-05 22:46, By: dlzallestaxes, IP: [22.214.171.124]