SEPP set up
L1: SEPP set upWhen a taxpayer sets up SEPP on an IRA, SEP IRA, or SIMPLE IRA, does the distribution payment have to be based on one account value or can you combine values from multiple IRAs? For example, client, age 55 wants to set up SEPP on $500,000 but has IRA #1 with custodian A with market value of $200,000 and IRA #2 with custodian B with a market value of $300,000. My understanding is that it is set up on oneÛ account, which seems to be what is listed on irs.gov. But the question has come up and I would like to clarify.
According to the IRS website,
The required minimum distribution method consists of an account balance and a life expectancy _.
The fixed amortization method consists of an account balance amortized over a specified number of years equal to life expectancy….2008-09-15 08:22, By: CAT, IP: [220.127.116.11]
L2: SEPP set upAn account balance can consist of any number of accounts, and the actual distributions can come from any of those designated accounts in combination. However, your documentation should be very clear which account numbers are used for your initial account balance, and the same date must be used for determining the balance on all of them.In your example, the client can use both IRA accounts for a single SEPP plan, OR can establish separate SEPP plans for each account using different starting dates and calculations. Each of those plans are totally independent of the other, and busting one of them has no affect on the other.Getting a 1099R with the penalty exception coding is becoming more difficult in any event, but using more than one account for a single plan further reduces the changes of receiving the code. However, this can be easily resolved by adding a 5329 to the tax return claiming the 72t exception.2008-09-15 13:02, By: Alan S., IP: [18.104.22.168]