Recalc 72t under amort method
L1: Recalc 72t under amort methodI have taken a fixed yearly amount from an IRA under the amortization method for almost 3 years. I was under the impression that once this was started my only other option to modification was a one time change to the RMD. This was too great of a reduction. I’ve since learned (through PLR readings) that I can keep the amort method but change the variables to new realities (new AFR, account bal, life expectancy (gettin older)) but to recalc based on the same day of the original calc. Since I never made a recalc in the prior two years, am I toast or can I now make a recalc even though I hadn’t in prior years? Anyone certain on how that is viewed by the IRS?2009-09-23 14:06, By: lgould, IP: [188.8.131.52]
L2: Recalc 72t under amort method>>was under the impression that once this was started my only other option to modification was a one time change to the RMD.
You impression is 100% accurate.
>>I’ve since learned (through PLR readings) that I can keep the amort method but change the variables
This was only an option three years ago when you first implemented the plan.
Making a change now would bust the plan.2009-09-23 14:20, By: gfw, IP: [184.108.40.206]
L3: Recalc 72t under amort methodmuch obliged for your time and input.2009-09-23 14:39, By: lgould, IP: [220.127.116.11]
L4: Recalc 72t under amort methodIt sounds like you want to reduce your distribution, but a current RMD switch would reduce it TOO much.
Since these one time switches are best made on a calendar year date, you might find that the stock market rally will boost your 12/31/09 balance enough, along with your extra year of age in 2010, to consider the RMD switch next January. In making the RMD switch, you can use the single life table for the RMD calc EVEN if you used joint lives for the amortization calculation originally. This would also result in a small boost for the RMD calculation.
But you are absolutely correct in recognizing that an insufficient distribution amount puts your entire plan in danger. Better to err on the safe side. If you are getting too much now, you can also save it in a taxable account and then use it to supplement the RMD calculation if you can make the switch in 2011 instead of 2010. That’s another option.
2009-09-23 20:30, By: Alan S., IP: [18.104.22.168]
L3: Recalc 72t under amort methodCould you summarize in a little more detail what the rules are for changing amort method variables in the years after the first? I assume the variables can be changed in consecutive years starting in year two. But if the variables are not changed in a year then no further changes can be made. Is this correct?2009-09-24 03:17, By: kepler, IP: [22.214.171.124]
L4: Recalc 72t under amort methodCorrect. If you do not recalculate in year 2, then you can not recalculate at any later point either. It is best to base the recalc on a calendar year basis, although there is one PLR that recognized using a different date than January 1st. You do not have to file anything with the IRS with your initial tax return to tell them you plan to recalculate. Keep in mind that this involves several additional factors to be considered each year and increases the risk of making a calculation error. Following is a link explaining the first PLR authorizing recalc – there are 4 otherPLRs on this site under Post Jan, 2003 PLRs:
http://www.72t.net/Articles/ArticleShow.aspx?WA=bedc947c-7c00-41ab-b1d6-5b33a6297d632009-09-24 04:25, By: Alan S., IP: [126.96.36.199]
L4: Recalc 72t under amort methodkepler…
If you are going to recalculate annually, it has to be spelled out when
the plan is initially adopted – it becomes part of the assumptions around which the plan is built. It isn’t really a pick and choose type thing and it should be documented.
If your plan will be doing annual recalculation,
then each of the three variables – age, interest rate and account
balance – will be adjusted annually on a specific date.
Check out our sampel SEPP form at http://72t.net/SeppSampleForm2009-09-24 10:19, By: Gfw, IP: [188.8.131.52]