Overpayment on montly distributions
L1: Overpayment on montly distributionsWe have a client who is has been taking out monthly payments since July of 2008. The broker calclulated a monthly payment of $2400 which is about $900 over the safe harbor rules. My question is since this has been going on for months will my client have to pay the 10% penalty on all the distributions since inception or can he pay the penalty on the $900 of the excess and readjust his monthly distributions as of today? Also, since this was an error due to the calculation of the broker, can there be an exception to the penalty?
2009-05-15 18:06, By: LG, IP: [184.108.40.206]
L2: Overpayment on montly distributionsThere is no real “safe harbor”, only a choice of which of the three methods thatwill be used.If there is a penalty, it is on the total distributions, not just the excess.
Also remember that you are dealing with the annual amount, not a monthly amount. I can take the annual amount, divide by 6 and take it all from January to July – as long as I take the annual amount, I have no problem.
Start by checking the broker’s calculations using the appropriate interest rate and our calculators. You state that the distributions started in July of 2008. Did the 2008 distributions total 1/2 of the calculated annual amount or 100% of the annual amount?
There is time to adjust the 2009 distributions so that the total distributed in 2009 totals the right annual amount. 2009-05-15 18:36, By: Gfw, IP: [220.127.116.11]