SEPP calculation from August, 2002
L1: SEPP calculation from August, 2002
I have been taking SEPP payments of $38227.08 since Oct, 2002.The IRS has requested that I document my IRA account values and calculation method used. The broker who set up the distribution is not providing any documentation. I turned 53 in April, 2002 and my IRA account was valued at either $579157.47 or $588989.41 in Aug, 2002 when the distribution accounts (3)were set up. 120% of the midterm rate in August, 2002 was 5.1% Is this SEPP set up within IRS guidelines? I see that new rules were issued for SEPP calculations and became effective after this distribution was set up. I have been trying to figure this out for two weeks it is causing many sleepless nights.
2009-04-02 18:13, By: Rick, IP: [188.8.131.52]
L2: SEPP calculation from August, 2002What interest rate did you use for the calculations?2009-04-02 18:21, By: Gfw, IP: [184.108.40.206]
L3: SEPP calculation from August, 2002Since the distrubutions started in October, 2002I think the best rate available was the August 120% midterm rate of 5.1%. But I’m not sure how or what the broker did in 2002.2009-04-02 18:34, By: Rick, IP: [220.127.116.11]
L4: SEPP calculation from August, 2002The 72t calculator “Help” says:
“Post 12/31/2002 – For any SEPP plan the interest rate that may be used is any interest rate that is not more than 120 percent of the federal mid-term rate for either of the two months immediately preceding the month in which the distribution begins.”
What about pre 12/31/2002? If distributions started in Octobet, 2002 could I use the July, 2002 midterm interest rate (5.53%). Or could I exceded the August, 2002 rate of 5.1% and use 5.3%? Can I base the calculation on the total value of all my IRA accounts or only those the distribution will come from?
2009-04-02 21:27, By: Rick, IP: [18.104.22.168]
L2: SEPP calculation from August, 2002Hello Rick:
Well, it seems relatively obvious to me that your IRA account value was $588,989, you were 53 at the time; therefore you had a life expectancy of 31.4 years and you made an interest rate assumption of 5.16%. Using this information results in an annual distribution of $38,227. The 5.16% interest rate is a rate that was materially below 100% of the long-term AFR from the months of 8/02 and 9/02.
The requirement to use a maximum of 120% of the MT/AFR did not come into effect until 1/1/2003. Plans launched on or before 12/31/02 simply needed to make an interest rate assumption that “did not circumvent the intent of IRC 72(t)(2)(A)(iv).”
2009-04-02 23:21, By: TheBadger, IP: [22.214.171.124]