Possible Mistake or broken sepp

L1: Possible Mistake or broken seppThanks for your help. I set up a rollover ira and sepp in 2003 and everything was fine with taxes for 2003,2004,2005. I also recieved some excess esop stock in 04 and reported it as income and paid the regular tax and the 10% early tax. did this break my sepp? Can you recieve money from another Qualified Retirement Plan while taking a sepp with the original IRA?2006-09-18 09:07, By: JohnniO, IP: [172.129.101.248]
L2: Possible Mistake or broken seppHello JohnniO:
It is not possible to provide a definitive answer based on teh information you have provided. We would need a lot more detail before we can answer effectively.
TheBadger
wjstecker@wispertel.net
2006-09-18 09:11, By: TheBadger, IP: [72.42.67.6]

L2: Possible Mistake or broken seppIf this excess ESOP stock never was part of the IRA you used to establish your SEPP, the distribution should not bust the SEPP. You can report separate retirement income on your 1040, in this case line 16a and 16b whether the penalty applied to that distribution or not, and the SEPP would not be modified (busted) as long as you also took the required amount from the SEPP designated IRA, unaffected by the ESOP distribution. Have you continued to get a Code “2” from the IRA custodian for the IRA on each year”s 1099R?2006-09-18 21:26, By: Alan S., IP: [24.116.68.91]

L2: Possible Mistake or broken seppHi, Thanks for your helpful and possitive feedback on this. if code 2 is exception for sepp then no, The IRA institution no longer prints exception codes on the 1099s. Does this mean that I can now cash in a separate 401K if I pay taxes and 10% without breaking the SEPP? Thank You. JohnniO2006-09-19 12:48, By: JohnniO, IP: [172.149.139.31]

L2: Possible Mistake or broken seppThe IRA custodian must enter a code in Box 7 of the 1099R. Code 2 indicates an exception to the early withdrawal penalty, anda SEPP is only one possibility that would generate a “2”. Some custodians will not provide the 2 code for SEPPs and therefore you get a code of “1” meaning the early withdrawal penalty applies. However, a taxpayer can claim their own exception by filing Form 5329 and entering the code to show that you are taking a SEPP payment. The difference between the taxpayer claiming the exception and the IRA custodian providing a “2” code generally means that you have a much higher chance for an IRS inquiry if you have to claim it yourself.
However, the above has absolutely nothing to do with receiving a separate retirement income source and a 1099R. As long as that other source was never part of your SEPP plan, known as your SEPP universe, it does not affect your SEPP. Just be sure never to roll those funds into a SEPP account or roll part of your SEPP into another existing account. If the ESOP stock was never a part of your SEPP account after you started your plan, all you have to do is report it separately, and it does not bust your SEPP.
As for your SEPP, if you are not getting the 2 code from that IRA custodian, you need to attach Form 5329 and claim the exception yourself. On the 5329 you would enter code #02.
2006-09-19 20:12, By: Alan S., IP: [24.116.68.91]