Missed 72t payment out of IRA – can we correct it?

L1: Missed 72t payment out of IRA – can we correct it?We have a situation where a substantially equal 72t payment out of an IRA forlast year (2004) was missed. The owner is not yet age 59.5. The owner changedcustodiansand forgot to set up the payouts to continuewith the new custodian.
Now we are in the next tax year (2005).My understanding is that theIRS rule is to now hit all previous payments with the 10% penalty because one was missed.
Is there any good way to correct this mess? Any suggestions?2005-09-08 11:22, By: frank1971, IP: [68.100.103.184]

L2: Missed 72t payment out of IRA – can we correct it?The owner seems to have a problem. While you could file for a PLR, I really doubt that based on the circumstances as presented, the IRS would make any allowances. Suggest that you start by doing an analysis of the amount that your client might owe. The IRS will calculate any interest on the past due penalty.
This is another perfect example of why someone should keep good documentation if he was documenting his records, he probably wouldn’t have missed the transaction.
Good luck 2005-09-08 17:38, By: Gfw, IP: [172.16.1.73]

L2: Missed 72t payment out of IRA – can we correct it?If he was taking only annual payments, then he probably will lose.
If he was taking monthly payments, and inadvertently missed one, then he might have a chance for leniency from the IRS.
When did the plan start ? If recent, maybe litle problem. If several years ago, probably a big problem.
Please clarify in order to get the proper answer.2005-09-08 19:41, By: dlztaxes, IP: [4.175.9.60]

L2: Missed 72t payment out of IRA – can we correct it?The IRA owner started taking substantially equal annual paymentssix years ago andjust turned age 58. So five annual (once per year) payments have been received, one was mistakenly missed (2004), and at least one or two more are required untilage 59.5 is reached.
So it sounds like paying the penalties and interest on the first five years may end up being the result.2005-09-08 20:16, By: frank1971, IP: [68.100.103.184]

L2: Missed 72t payment out of IRA – can we correct it?Hello frank:
Admittedly a sticky wicket. Currently, your client is looking at penalties and interest in the neighborhood of 70% of the usual annual distribution; e.g. if your client was taking out $50k per year, the penalities & interest will approximate $35k.
If the above is in the realm of reasonability, I would consider a private letter ruling (“PLR”). PLRs are not guaranteed & further, at this point, the fact set is not particularly favorable; nonetheless, spending $3k – $4k for a PLR is potentially worth the attempt when looking at “for certain” penalties that are 10X or greater.
At a minimum, seek out a profressional in this area; buy an hour or two to discuss the facts & circumstances in extreme detail & get an opinion on the probability of success.
TheBadger
wjstecker@wispertel.net
P.S. I am on the road (always on two wheels) w/o computer for the next 7/8 days. I’ll be back.
2005-09-08 20:30, By: TheBadger, IP: [66.250.23.24]