IRS levy on an account in a SEPP

L1: IRS levy on an account in a SEPPAn initeresting question came up. What happens if an IRS levy is issued on an account with a 72(t) distribution in progress and the trustee/custodian pays the levy. . Does it bust the plan? My initial answer is yes but I haven”t seen any PLRs on this subject or any discussion. 2008-09-19 12:09, By: JEVD, IP: [204.15.168.100]
L2: IRS levy on an account in a SEPPYou are correct, in most cases it would bust the plan. However, if they levy were small enough such that the taxpayer could reduce his own distributions in the year of the levy by the amount of the levy, the plan would not be modified.But most levies are likely to be large enough such that the taxpayer cannot adjust distributions to fall within the total for the year. In that case, the plan is busted, but there would not be a penalty on the levy amount itself since an IRS levy has it”s own early withdrawal exception in 72(t).2008-09-19 21:39, By: Alan S., IP: [24.116.165.60]