SEPP

L1: SEPPDoes anyone know if the following is permitted by IRS? If a retirement account on 12/31/2008 is worth $100,000 and calculations dictate $5,000 is 2009 distribution-can you wait until December of 2009 and then withdraw $5,000? Also, if you are still working and the required distribution is more than you need can you still contribute to a deductible IRA to minimize tax impact?
Can the calculator on this site be used or is this just an estimater? If you take that $5,000 distribution do you just list it as a $5,000 IRA distribution in the appropriate box on 1040 or is there a form requiring calculations?
Thanks2008-01-22 03:53, By: MAGIC I, IP: [76.98.176.185]

L2: SEPPcan you wait until December of 2009 and then withdraw $5,000?Yes, but remember if this is the first year, the interest rate is determined by the date of the first distribution, not the effective date of the plan.
>>can you still contribute to a deductible IRA to minimize tax impact?Yes, as long as you are eligible and it is a different IRA – not the SEPP IRA.
>>Can the calculator on this site be usedYes. When you take the distribution you will receive a 1099 from the IRA Custodian and merely reposrt it on your tax forms – probably accompanied by IRS Form 5329.
2008-01-22 04:06, By: Gfw, IP: [74.136.102.241]

L2: SEPPIRA distributions are reported on form 1040, line 15. The GROSS amount goes in box 15a (for information purposes only),and the TAXABLE amount goes in box 15b (which is the column on the right with all other taxable figures.
The 5329 form is filed with the form 1040 in order to report exceptions to the 10% penalty for early distributions.
Once you set up the plan, if you are working and do not take the first “required” distribution, I guess you would in effect “bust” the plan. But you are not “required” to take any distribution, and there would probably be no “penalty” for not taking the first one. After the first distribution tehre would be a 10% penalty on all distributions, but that might be an option to consider if your income increases — i.e. stop the SEPP 72-T and pay the 10% on just a few payments, rather than remaining locked in for 5 years.
Therefore, there would be noreason not to make an IRA contribution if you wanted to reduce taxable income, or to make a ROTH IRA contribution if that was more advantageous in the long run.2008-01-22 10:11, By: dlzallestaxes, IP: [151.197.32.109]

L2: SEPPTHANKS2008-01-22 17:01, By: MAGIC I, IP: [76.98.176.185]

L2: SEPPDoes the SEPP 10% penealty exeception allow for the purchase of a five year period immediate annuityusing IRA funds? IRA owner isage 57. I”m thinking not…
Eric2008-01-24 18:25, By: ERIC, IP: [71.109.236.251]

L2: SEPPI would suggest trying to find the funds to carry you the next 2 1/2 years to age 59 1/2. This way you aren”t locked into a set figure for 5 years. Otherwise, you could go a couple of years, ned more money, bust the plan, and pay the 10% penalty on all distributions from the beginning until then.2008-01-24 20:14, By: dlzallestaxes, IP: [141.151.95.57]

L2: SEPPEric… the answer to your 5-Year annuity question is “It Depends”.
If it consists of all SEPP assets and will be used to totally fund the SEPPdistribution, the answer is No.
If it is used inside a “Custodial IRA” where the entire balance of the account is used to calculate the lifetime distribution and a part of the assets are invested in a 5-Year annuitypayable back the plan, to the answer is yes.2008-01-25 01:51, By: Gfw, IP: [74.136.102.241]