SEPP Universe Documentation

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L1: SEPP Universe DocumentationIf you have several IRAs and only want the 72t distributions to come out of one of the IRAs, what documentation is needed to justify that the beginning balanceincludes more than the IRA from which the distributions are being made?2009-05-21 01:18, By: Jimbo, IP: []
L2: SEPP Universe DocumentationDocument your calculations with copies of statements from all of the IRA accounts effective the same date or as close to the same date as possible. The statement totals comprise your initial account balance. Be sure no distributions or contributions were taken between the date of the statements and your first 72t distribution.
Although you will be free to take distributions from the other IRAs if you wish to reach your total in that manner, your reporting will remain simpler if your distributions come from just one account, as you will only have one 1099R to deal with. However, if the account balance of the account you wish to withdraw from is relatively small, you will probably get an IRS inquiry because the IRS will see the year end balance of the account and if your distributions are a high %, such as 15% or more of that balance, the IRS may think your calculations are flawed. That’s when you would provide copies of the other statements that you used and that should take care ofthe inquiry.
2009-05-21 04:26, By: Alan S., IP: []

L3: SEPP Universe DocumentationAlan-
Am I suppose to (or can I) do the calculations and documentation and keep them in a safe deposit boxor is this suppose to be done by the account custodian?
Also, regarding the 1099R, if you’re only taking the distribution from one account, does the 1099R just indicate the account that the distributions are coming out of, or are all accounts listed on the 1099Rthat were aggregated in order to determine starting balance?
How do you report the starting balance and each year end balance to the IRS? Are there forms that I should use when filing taxes each spring?2009-05-21 14:45, By: Jimbo, IP: []

L4: SEPP Universe DocumentationAs ridiculous as it sounds, the IRS does not require any reporting of the calculations, accounts, or balances involved in the initial calculation of a SEPP 72-T plan, nor any annual information on balances thereafter. As a matter of fact, “busting” a plan is only “self-reported” or a result of an audit or inquiry from the IRS. The only forms that report anything to the IRS is the annual 1099-R from the institution showing the amount of the distribution each year, and the 5329 by the taxpayer to indicate the code 2 or other exceptions to the 10% penalty for early distributions.
I always included a schedule/footnote with the tax return showing the accounts, balances, and other criteria used to determine the annual SEPP amount, and a note if the first year is a prorata or annual amount. I attach this same schedule/footnote to every tax return after the initial year. If there are only a couple of accounts, I attach copies of the applicable satements as well. ( Of course you cannot do this if you e-file, unless you send it as a separate paper attachment with the appropriate cover/transmittal form.)2009-05-21 20:57, By: dlzallestaxes, IP: []

L5: SEPP Universe DocumentationThanks Allen and dlz, but I have more questions:
Does the custodian need to have documentation that indicatesthatthe 2 IRA balances are aggregated toestablish the beginning balance prior to commencement of distributions?
What and when is IRS form 5498 used?
Are there any books or IRS publications that discuss “SEPP UNIVERSE”?
What is the advantage of having 2 IRAs as a sepp universe with 1 custodian? Why not have them combined into 1 IRA?

Thanks in advance2009-05-21 22:15, By: Jimbo, IP: []

L6: SEPP Universe DocumentationForm 5498 is merely a reporting form for the institutions to tell the IRS the 12/31 balance in each IRA account, and the amount of any Contributions to and Distributions from each account. Taxpayers do nothing with it. I use it for reporrting on form 8606 for Non-Deductible IRA purposes only.
I would send a letter to the custodian to identify which accounts are part of your SEPP universe, and which are to be kept separate (for emergencies). If there are multiple accounts at one broker/custodian that are part of the SEPP universe, they can be combined. But some brokers separate accounts based upon the mutual fund managers that they use, as well as keeping REIT investments separate, etc.2009-05-21 22:37, By: dlzallestaxes, IP: []

L7: SEPP Universe DocumentationIn your first response to this post you said that annual account balances are not reported each year. In your second response you indicate that form 5498 reports the year end balance and is sent annuallyto the IRS by the custodian . Is 5498 only used when there is a contribution to the IRA? Is it used each year on an IRA with a 72t distribution that uses the Amortization Method that shouldn’t have any contributions?
Also, any leads you can give me to finding literature on the “SEPP UNIVERSE” concept?

Again, Thanks.2009-05-21 22:59, By: Jimbo, IP: []

L8: SEPP Universe DocumentationIt is used every year for every IRA by evey custodian whether or not there are any deposits orwithdrawals.2009-05-21 23:05, By: Gfw, IP: []

L9: SEPP Universe DocumentationThanks Gfw.
Where can I get literature that discusses”Sepp Universe”? Is there an IRS publication that talks about this? I don’t see anything in Pub #590.2009-05-21 23:27, By: Jimbo, IP: []

L10: SEPP Universe DocumentationOnly in Bill’s book:
2009-05-21 23:34, By: Gfw, IP: []

L10: SEPP Universe DocumentationI don’t understand why you seem to be so fixated on the term or concept of ” SEPP UNIVERSE”. Unless you are planning to do something way out of the box, the explanations given here, and throughout this website, are all that really is important. If you are getting some conflicting opinions or advice, then mention that for us to comment upon. Just betwenn 3 or 4 of the contributors to this website you have 100-150 years of professional experience, and no products or services that any of us are trying to sell you because thre is no direct contact. We provide our time and knowledge for the good of everyone. If you want different answers, I suggest you look elsewhere.2009-05-21 23:48, By: dlzallestaxes, IP: []

L11: SEPP Universe DocumentationYou are probably correct that I appear to be “fixated”….my wife would agree with you. Everything that I have read regarding 72t’s, stress that once the plan begins, that besideschanging to the RMD Method, there is no way to make changes and avoid the retro 10% with interest. Therefore I want to be abolutely certain about the rules before moving forward. Should I be challenged down the road, I’d like something more substantial to hang my hat onthan an e-mail from an internet forum.
As to wanting “different answers”, that is not my intent. I can’t tell you how enthusiastic I am about this site and just today recommended it to my accountant (who by the way is not familiar with “Sepp Universe”. My sole purpose is to find a plan that will work for me and is unquestionably defensible.
Isense the experience and knowledge behind the answers that are given and I do appreciate the responses. Please don’t write me off yet, think of me as cautious, not belligerent.2009-05-22 03:28, By: Jimbo, IP: []

L8: SEPP Universe DocumentationSorry for any confusion. My first response meant that the TAXPAYER does not have to report SEPP 72T account balances with their 1040 any year. The second response indicated correctly that the CUSTODIAN reports the year-end balances of ALL IRAs, SEPP and otherwise, by 5/31 of each following year.2009-05-21 23:41, By: dlzallestaxes, IP: []

L9: SEPP Universe DocumentationJimbo,
There are few if any IRS regulations defining the details for SEPP plans. Outside of RR 2002-62, most of the accepted body of knowledge is derived from a series of IRS private letter rulings over the last 15 years or so. With respect to the “SEPP universe” issue, the term is an unofficial description of the IRA accounts that are included in a SEPP plan. The following link show a Q&A that addresses a couple PLRs that gave rise to the use of multiple IRA accounts for a SEPP plan: 03:42, By: Alan S., IP: []

L10: SEPP Universe DocumentationAnd I knew you really wanted to read the real thing, so here it is: 04:22, By: Alan S., IP: []

L11: SEPP Universe DocumentationAccording to the 2001 edition of Webster’s New Dictionary of the English Language, a “universe” is defined as “the whole body of things observed or assumed.”
Following Webster’s definition a “SEPP Universe” would be agrouping of appropriate accounts used to define one element of a SEPP Plan.
Bill Stecker’s book uses the term “SEPP Universe” which makes sense. Don’t get hung up on this terminology … it’s not worth wasting time when there are so many other things to focus on when designing a compliant SEPP Plan. As far as worrying about the information you are getting from this site, in one of your previoius posts didn’t you state that the IRS had referred you here? That alone should be a good enough recommendation that our information is valid.
BTW you are asking some good questions. You might also review the FAQ’son this site and buy Bill Stecker’s book, which is the best written documentation for SEPP Plans.
Jim2009-05-22 13:33, By: Jim, IP: []