Reporting a busted 72t

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L1: Reporting a busted 72t
I’m working with a friend to help them with a busted 72t distribution. Birthdate of 3/21/61 started taking 72t in 2005. Took it each year with the same company until 2009. In 2009, they rolled the money over into a new IRA and continued to take the 72t distribution. Then, in 2015, they took more than the 72t distribution amount and in 2017 completely forgot to take any of it. What should we do to report all of this? What year was the 72t actually busted? Thanks for any help in advance! -Michael
2018-04-02 17:34, By: CMP Marietta, IP: []

L2: Reporting a busted 72t
It was busted in 2015 when too much was taken. However, get more info about 2015 to see if the extra distributions may have been qualified under a different exclusion.
If not, then amend 2015 accordingly on the cumulative distributions starting from 2005. The distributions in 2016 were also subject to the 10% penalty, so amend 2016.
Since the SEPP 72-T was busted in 2015, there is no penalty for not taking any distrinbutions in 2017.After 3/21/2020 he can take distributions without penalty. Any distributions in 2018, 2019, or before then would also be subject to the 10% penalty for early distributions.
As always “a little knowledge is a dangerous thing”, and can often be costly. Your friend should have asked or checked before taking the extra money in 2015.
2018-04-02 17:49, By: dlzallestaxes, IP: []

L3: Reporting a busted 72t
Thank you so much for the reply! Let me make sure I understand. We need to do ammended returns from 2005-2016? He did have kids in college from 2014-2016 which could give him the qualified higher education expense exception? Thanks again for all your help.
2018-04-02 18:16, By: CMP Marietta, IP: []

L4: Reporting a busted 72t
Correct. If that covers the excess distributions, then amend 2014, 2015, and 2016 with additional separate form 5329 (code 08). If still not enough, see if any of the other exceptions do the job for all of these years.
2018-04-02 18:31, By: dlzallestaxes, IP: []