SEPP Distribution in First Year
L1: SEPP Distribution in First YearRegarding the initial year of a SEPP:
If I set up a SEPP that would result in an annual payment of $100K/yr, but the SEPP distributions begin inJuly,can I take the $100Kby Dec. 31, oram I limited to only $50K?
During the first year of a SEPP that begins mid year, how does the IRS know what your annual amount will be? Seems like they wouldn’t know until after the completion of the first entire calendar year.2009-05-18 22:58, By: Jimbo, IP: [126.96.36.199]
L2: SEPP Distribution in First YearIt is the taxpayer’s option to take either the entire annual calculated amount during the first year, even if you start in Dec., or take a pro-rated amount based upoon the number of months. The IRS never really knows what your annual calculated amount is, nor if it is correct, until you possibly are audited and they ask for your documentation.
The IRS does not have the computer capability, nor the programming, to keep track of SEPP 72-T plans and the related figures. They trust you to do it correctly. That’s why the penalties are so severe if you decide to play the tax audit lottery.2009-05-19 00:42, By: dlzallestaxes, IP: [188.8.131.52]
L2: SEPP Distribution in First Year
One point to remember is that you may or may not get an exemption coded on your 1099, so you may have to file 5329.
Who gets audited could depend more on “luck of the draw” than anything. It could also be based on the annual amount claimed as exempt – the larger the SEPP distribution, the more they collect from thetaxpayer is there is something wrong.
The moral of the story… keep good documentation in case the day arrives.
2009-05-19 01:28, By: Gfw, IP: [184.108.40.206]