Reporting busted Sepp on tax return
L1: Reporting busted Sepp on tax returnI ended a SEPP prematurely in 2008. I received very clear instructions from this forum on how to report the early distributions as well as the penalties. I am not sure what to do about the interest that I will owe. The breakdown is as follows:
First Distribution Feb 06 of $5141-tax was paid on this amount; age 57 _
Second Distribution Feb 07 of $5141-tax was paid on this amount; age 58 _
Third Distribution Feb 08 of $5141 and withdrew balance of $55,000 Aug 08. age 59 _
I am paying income tax on $60,141 this year. In addition, I am reporting on Form 5329 that I owe the 10% penalty on $10,282 for distributions taken in 2006 and 2007.
I do not know how to handle the interest owed on the two distributions prior to age 59 1/2.How is the interest calculated? I assume that I am going to pay interest on the first distribution for three years and the second for 2 years? Is the interest charged per tax year? Should I send an estimated payment? How would I report that? Can anyone estimate how much this might be? I want to report this in a way that will enable me to pay the penalties and interest that I owe without confusion and unnecessary correspondence with the IRS. The SEPP was not a good decision and I have learned a valuable lesson.
Thank you for your help. I tried working this out in Turbo Tax, but there is nothing at all about 72ts in the entire helpÛ section of that software! So, I guess that I will need to do a written return.2009-01-23 14:15, By: debrah107, IP: [220.127.116.11]
L2: Reporting busted Sepp on tax returnThe IRS will calculate the amount and let you now.2009-01-23 14:39, By: Gfw, IP: [18.104.22.168]
L2: Reporting busted Sepp on tax returnDebrah:Don’t give up on Turbo Tax. Just plug in the amounts from your Form 1099-R’s and it will carry forward to the correct forms. You should be able to work through everything within the program.If you still are not comfortable with your return, then find a CPA or EA (Enrolled Agent) to work with. They will be able to help you with this particular problem and will probably charge you a nominal fee, or they may do it for free. This willsave you much time and grief over trying to complete and file a paper return.Jim2009-01-29 15:27, By: Jim, IP: [22.214.171.124]
L3: Reporting busted Sepp on tax returnJim, thanks for your reply. The problem is that I have only 1 1099 and that only shows the amount for this years distribution as well as the amount I withdrew when I surrendered the account. I need to pay tax on that amount, but not a penalty because I was 59 1/2. The problem is that Turbo tax won’t let me alter the tax return to include the amounts from the 06 and 07 distributions on which I need to pay the 10% penalty and interest. The 1099 for those amounts were from the years I received them because I paid income tax on those amounts in the year it was due.2009-01-29 16:52, By: debrah107, IP: [126.96.36.199]