L1: New SEPPNew SEPP,DOB 4/8/1960, Date of 1st distribution planned for July 13, 2015.
I will be receiving an ESOP distribution as a rollover from previous employer in june 2015. This IRA will initially deposited in a cash account inside a brokerage account at VG. Half of this IRA will be split off into a separate brokerage account as a 2nd IRA. The second IRA will be used to establish an SEPP on the entire balance of the 2nd IRA. This brokerage account will have its own cash account from which to I will take yearly distributions.
I don’t understand your recommendation to use a “Custodial brokerage account”, as opposed to what I am just calling a brokerage account. Please explain.
Are there any preliminary steps/processes/notification to either the custodian(VG) or the IRS that is needed to notify them this account will be an SEPP? Do I simply have a copy of the calculations, and documentations of the plan, take my yearly distributions and file the required 5329 with my taxes?
Thank you for a great resource.
2015-06-06 02:36, By: mackster, IP: [184.108.40.206]
L2: New SEPPAll IRA accounts must be held by a financial institution as the CUSTODIAN of the IRA account. You are not allowed to hold securities outside of a custodial account, i.e. you cannot have the securities certificates sent to you.
It is just semantics. Just make sure that it is a brokerage account within an IRA.
You do not have to send any documents to Vanguard, but they might like a copy if you ask them.
It is only YOUR responsibility to generate and keep the documents. No financial institution will accept any responsibility for the accuracy of you figures because they do no know what other accounts you might have, or if YOU are including the same account in multiple calculations of multiple SEPP 72-T accounts.
HOWEVER, before you do anything :
1. When did you stop working for that employer ?
2. Do you have a 401-K ?
3. Did you check if there are any EMPLOYER SECURITIES in the ESOP ? If there are, ask the HR dept if these are NUA securities ( “NET REALIZED APPRECIATION”), and what the cost basis is of those employer shares, and then read up on this special provision in the tax code that could save you thousands, or tens of thousands in taxes. ( J K Lasser YOUR INCOME TAX 2015 has a great 2-page discussion, with examples.)2015-06-07 02:14, By: dlzallestaxes, IP: [220.127.116.11]
L3: New SEPPI seperated from service with my employer July of 2012.
I no longer have a 401k, it was rolled into an IRA after i seperated from service.
I have been doing some research on NUA, I plan to meet with a tax attorney soon, though this will be the third and final distribution and i have been told that NUA will not apply since it was not a lump sum distribution.
I do plan to make sure, as most of the value is through appreciation.
Thankyou for your help.2015-06-07 04:46, By: mackster, IP: [18.104.22.168]
L4: New SEPPSince you separated in 2012, and rolled it over into an IRA, you cannot use the special provision to avoid the 10% penalty.
Since you have taken prior payments, you cannot use NUA because, as you said, you do not have a lump sum distribution.
You can probably save yourself the cost of meeting with a tax attorney, especially sine they are usually best in resolving legal problems, rather than retirement planning. If you were to meet with anyone, I would suggest a tax practitioner, but in your case I do not see much hope for any unique approach. But, tax planning to try to keep in a 15% tax bracket would be beneficial.2015-06-07 18:26, By: dlzallestaxes, IP: [22.214.171.124]
L5: New SEPPI have followed everything you said, and felt as though I understood the provisions of a 72t through reading this site.The first paragraph in your last comment confused me.
A 401k rolled over to an IRA could not be used as part of an SEPP to avoid the 10% penalty?
Thanks again!2015-06-07 19:25, By: mackster, IP: [126.96.36.199]
L6: New SEPPThe special provision referred to was the age 55 separation from service penalty waiver that would eliminate the need for a 72t plan. You do not qualify for that because you separated prior to the year you will reach 55. If you start a 72t plan now, it will have to be from your IRA.2015-06-08 00:16, By: Alan S, IP: [188.8.131.52]
L7: New SEPPOk, that makes sense. I think I’m good know.
Thank you so much for a great resource.
Regards-mackster2015-06-08 01:26, By: mackster, IP: [184.108.40.206]
L6: New SEPPThere is a special provision that allows distributions from 401-K’s in the year that someone separates from service from that employer if they are 55 or will become 55 in that calendar year. Once you roll over a 401-K to an IRA, you are no longer eligible for that provision because it does not apply to IRA distributions.2015-06-08 04:04, By: dlzallestaxes, IP: [220.127.116.11]