last year of 72t-Conflicting info

L1: last year of 72t-Conflicting infoI have a client who turns 59.5 this march. she started her 72t in MArch 2000 and pro-rated her first year. she intends to change her distributions in April of this year after turning 59.5 and would have takendistributions for 60 months. Under FAQ of this site it states she may not change her distribution until the end of the year that she turns 59.5. However she spoke to IRS and got Agent ID# and they said she could change in April without penalty.? Any thoughts or comments would be appreciated. 2007-03-07 07:42, By: Matt, IP: [66.219.164.250]
L2: last year of 72t-Conflicting infoAs long as she has met the 5-year requirement, she can make the change antytime after attaining age 59.5.
Which FAQ are you looking at so that I can correct?2007-03-07 07:49, By: Gfw, IP: [74.136.109.63]

L2: last year of 72t-Conflicting infoMatt and Gordon,
I may have found the posting in FAQ that Matt had read, but it is correct as stated. Because his client started the 72t (SEPP) seven years ago, once she reaches 59.5 (and a few days..) she had met both the minimum of five years and the age 59.5 reguirements, and any future distributions should be considered as normal with no penalty. I think the Q&A below is to keep people from taking any other distributions before the minimum of five years (from when first SEPP payment was received) have fully run their course (assuming they are also at least 59.5). In my case, I started my SEPP on 3/30/2006, and will be 61 when my 5 year SEPP ends on 3/30/2011. My last payment (I am paid twice a year) will be given to me on 9/30/2010, and the Q&A below is to warn folks like me that we CANNOT take any other money from the 72(t) IRA accounts(s) until we cross the full five years from first payment, which in my case is 6 months after I get my last semi-annual distribution. If I were paid annually, it would force me to wait a whole year (which is still until after 3/30/2011) for the five year clock to run out) after getting that 3/30/2010 5th annual payment before I could take other money out of that IRA without busting the SEPP, and incurring all of those penalties.I hope this helps. KEN

Q. Assuming the 5-Year rule, when can payments be modified? A. In 1998, a tax court held that a payment received by a taxpayer after he received five equal annual installments and after he reached age 59-1/2 was a modification of the Substantially Equal Periodic Payments. The Court held that the modification occurred within the 5-year period beginning with the first payment, thus triggering the recapture of the 10-percent penalty tax. The Service argued that the 5-year period began with the first distribution and ran until the end of the 5th year. The tax court agreed – the 5-year period closes at the end of the 5 years beginning with the first distribution, and does not end on the date of the 5th annual distribution. Arnold v. Comm., 111 TC No. 12 (1998).
2007-03-07 10:34, By: Ken, IP: [151.204.253.147]

L2: last year of 72t-Conflicting infoken has referenced the correct FAQ. However I must be misinterpreting the answer. it seems to me that it clearly states that even if the participant has met the 5 year requirement and is over age 59.5 they STILL must wait until after the end of the year that they turned 59.5 before any modifications. The only thing i can think of is that they are referring to annual installments and my client took them from March 1, 2000 to March 1, 2007.- because she was not 59.5 yet.2007-03-14 12:57, By: matt, IP: [66.219.164.250]

L2: last year of 72t-Conflicting infoIf using the 5 year rule, then no change can be made for 365 days times 5 years plus 2 days for good measure.
The count starts on the date of the first distribution. If your client is over age 59.5 and has met the 5 year rule, no problem.
In the tax court case they were measuring theend of the 5 year period as the day after the 5th payment was made rather than a full5 years after the date of the first payment.2007-03-14 13:13, By: gfw, IP: [74.136.109.63]

L2: last year of 72t-Conflicting infoI just ran the “First Payment Modification Date” calculator with the following inputs:
DOB: 03/16/1960 Date of First Payment: 03/16/2007 (today)
Here are the results:

Attained Age on 1st Payment Date
47

5-Year Period Ends
3/15/2012

Date Age 59.5
9/16/2019

First Payment Modification Date
9/17/2019
If the persontakesmonthly distributions through 09/16/2019, and then waits until 09/18/2019to “modify” the amount taken, can the person choose to reduce the distribution to $0.00, thus stopping all distributions?
I think this is the “unasked” question in this posting as well as similar postings we have had.
Jim2007-03-16 07:42, By: Jim, IP: [24.252.195.14]

L2: last year of 72t-Conflicting info Actually it has been answered many times. If the five year rule has been met, once you turn 59.5 you can pretty much do whatever you want – the 10% penalty stops at age 59.52007-03-16 08:00, By: Gfw, IP: [65.211.152.132]

L2: last year of 72t-Conflicting infoSo let”s take this one step farther for my dated example. Assume $12,000 is the calculated, annual distributions required for a valid SEPP Plan, and distributions are taken $1,000 per month.
CY 2007, March through December, 10 months = $10,000
CY 2019, January through September, 9 months = $9,000
The first year and the last year distributions do not equal $12,000 but this is OK. Correct?
Jim2007-03-17 12:06, By: Jim, IP: [24.252.195.14]

L2: last year of 72t-Conflicting infoJim,
The partial year payments in first and last year in your example are not an issue because the participant took a SEPP that lasted much longer than 5 years, and took substantially equal periodic payments throughout. Since they crossed the 5 yr requirement in 2012, and crossed the age 59.5 requirement in 2019 while taking monthly payments, once both “finish lines have been crossed in your example, they have finished the monthly payments and can end or alter without penalties. That is my reading on it. I think the only time the “stub” year question comes into play is when the person is only doing “five” years worth of payments, and hitting 59.5 at similar time. Then, they must make sure they take the total of at least 5 years worth of $$. KEN2007-03-18 05:23, By: ken, IP: [151.199.45.134]