L1: Late Contribution?I retired 2 years ago at age 56. Pension and 401K rolled to IRAs and began SEPP in 2008. Just received written notice from my former employer that they recently audited their records and found that they had underestimated my pension lump sum by the small amount of just under $250.00, which they sent to my IRA trustee to be added.
I have checked the IRA balances and activity, the money hasn’t been added yet.
What is my best course of action to avoid busting the SEPP? Is this even a problem as the error was totally out of my control?2010-08-09 18:01, By: Jimbo, IP: [220.127.116.11]
L2: Late Contribution?For this small amount, I would request that they write the check to you, icnclude it in taxable income, and pay the $ 25 (10%) penalty. I think ithat it will cost you much more in professional fees to try to get the IRS to understand what happened, and even though they might bust your plan, which would become really costly.
An alternative would be to justhave the transfer made, and hope that IRS never even looks at it.2010-08-09 18:14, By: dlzallestaxes, IP: [18.104.22.168]
L2: Late Contribution?I’m no expert on this, but if it happened to me, I would advise my custodian to NOT ADD IT to my account, and just send me the check. If you cannot cash it due to the way it is worded, then send it back and ask them to reissue it directly to you, (explaining the potential tax penaltiesof having it added to your IRA with SEPP already running) and just cash the new check and pay the $25 (10%) penalty along with the regular taxes on it at the end of the year.
If it hits your account before you can have it stopped, there may be a way to have it reversed, but I will leave it to experts to comment on that aspect.
It seems to me they should have asked you how you wanted to receive this $250 to begin with.
2010-08-09 18:14, By: Ken, IP: [22.214.171.124]
L3: Late Contribution?I agree with the prior posts. But if the check has already left the plan, you might be able to divert it by having your IRA custodian open a new IRA account to receive the rollover. Anything to keep it out of your 72t IRA. From there you could distribute it or not based on other considerations.
In the end, your SEPP should be safe. You could use the the administrative delay exception to save it, but this could be a time consuming hassle to deal with, and possibly expensive.2010-08-09 23:43, By: Alan S., IP: [126.96.36.199]
L4: Late Contribution?GREAT SUGGESTION !!!2010-08-10 00:08, By: dlzallestaxes, IP: [188.8.131.52]