L1: IRS PenaltyI filed my taxes in 2007 and 2008 under the 72t exception rule. Now I find that my brokers never filed the paperwork with the company that holds my IRA and consequently they have miscoded my 1099s and the IRS wants their penalties paid. My brokers want me to pay the penalty, promise to reimburse me and let it go at that. Is this legal? Also, I have turned 59 1/2 midway through 2009. Will I owe a partial penalty for this year?2009-07-29 14:36, By: thimblegirl, IP: [188.8.131.52]
L2: IRS PenaltyHello thimblegirl:
Brokers regularly screw up paperwork as well as more substantative issues. However, what governs here is the computations to start the plan and the subsequnet transactions; not paperwork. It is quite possible that everything is fine and there are simply some i’s to be dotted and t’s crossed.
We need a lot more information to pass judgement on whethger or not any surtaxes or interest are due.
2009-07-29 14:44, By: TheBadger, IP: [184.108.40.206]
L2: IRS PenaltyNo paperwork needed to be filed with your IRA Custodian, the IRS or anyone else. And, I’m guessing that your 1099s were properly coded, just coded to reflect the 10% exemption.
If I’m right so far, you only needed to file IRS Form 5329 to claim the exemption on your own.
Start by gathering the paperwork that was initially created and check the assumptions used in the calculations to determine if they were right based on your age and the date of the first distribution.
If yes, then merely attempt to justify the plan to the IRS and you will probably pay no penalties.
If no, I would contact the broker’s Broker Dealer before doing much of anything…see what they have to say. The broker may very well be trying to bury the whole problem and save his/her license by having you pay the penalty and then reimbursing you- if the broker messed up, you may be able to get more than the penalty and interest.
2009-07-29 14:46, By: Gfw, IP: [220.127.116.11]
L3: IRS PenaltyBrokers are strictly prohibited from offering to reimburse you for actions like you have described.Contact the Broker / Dealer office of the brokerand talk with their Compliance Officer to discuss this situation.
Follow through with TheBadger’s suggestion to give us more information to review your situation to determine whether you really have a problem or just need to file IRS Form 5329 to get this cleared up.
You will have to continue your SEPP Plan to satisfy the 5-year element.
Jim2009-07-29 14:57, By: Jim, IP: [18.104.22.168]
L4: IRS PenaltyI’ll be happy to provide additional information to you if you tell me what you need. I know the necessary recalculations were never done. I did file Form 5329 with the correct exemtion code but I suspect that because it didn’t match my 1099 the IRS kicked it out. If, according to the iRS I never had the 72t, why would I have to continue the 5-year withdrawal? I am so confused. Do I need a lawyer?2009-07-29 16:58, By: thimblegirl, IP: [22.214.171.124]
L5: IRS PenaltyCan you provide the following information – or at least most of it?
Your date of birth
The date of the first distribution
The balance in your IRA used to determine the distribution
The date that balance was determined
The interest rate used by your plan
The annual distribution that you have been taking.
2009-07-29 17:59, By: Gfw, IP: [126.96.36.199]
L6: IRS PenaltyAfter re-reading your posts, it sounds like you have received atleast one letter from the IRS demanding payment of penalties and interest. If this is correct, in addition to the information GFW asked for, how many letters have you received from the IRS and what are the dates on each letter. You have a limited time to respond to these letters and that is critical information in your case.
Jim2009-07-29 18:28, By: Jim, IP: [188.8.131.52]
L7: IRS PenaltyIf you think that you can deal with the IRS without a tax professional, you deserve whatever happens. If you have a toothache, you’d go to a dentist. If you had the flu, you’d go to a doctor. Why are you reluctant to pay a professional to resolve this, and avoid all the angst you are putting yourself thru?2009-07-29 19:01, By: dlzallestaxes, IP: [184.108.40.206]