Payments after busted 72t

L1: Payments after busted 72tHi. I inherited a client’s acct. They started an RMD in 2010 at the age of 52. 2 years in, they busted it with some large withdrawals. However, the IRA company continued the monthly payments even though it was busted. From what I’ve read, the schedule of payments should have ceased after the bust. Also I am concerned bc it seems as if each of these RMD payments both prior to and subsequent to the bust are treated with the 10% penalty. Can the client stop the payments (he has no need for them) or must be still wait until 59? Thanks.2016-02-04 04:26, By: Bevin76, IP: [107.77.100.121]
L2: Payments after busted 72tOnce a SEPP is busted the payments can be stopped or changed since the plan ended when it was busted. The difference is that allthe retroactive penalty (and interest if the IRS assesses interest) is reported on a Form 5329 for the year the plan was firstbusted. After that the penalty is paid every year for distributions received that year. Note that the taxpayer might qualify for some other penalty exception to replace the lost SEPP exception and that could reduce the penalties incurred the last few years. Tax years 2012 to 2014 are still open for amending returns and claiming a different exception if they qualify for one. Obviously, other exceptions would probably not cover a large part of the penalized distributions. Sounds like the IRS has never contacted this taxpayer….2016-02-04 19:45, By: Alan S, IP: [160.3.87.235]

L3: Payments after busted 72tThanks, that is what I thought. Do you happen to know the place in the IRS code describing this, as my firm isn’t allowing the client to stop withdrawals and wants me to furnish them with the correct info (which is frustrating to say the least).2016-02-05 16:33, By: bevin76, IP: [107.77.72.46]