started 72t sepp and then became disabled

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L1: started 72t sepp and then became disabledI am 57 andstarted a 72t sepp in January and then became disabled (receiving SSDI for total disability) in June. Can additional withdrawals be made penalty free because of disability?
I have funds in rollover IRA that is NOT part of the Sepp. Can funds be taken from this IRA without penalty, due to disability?
Thanks,
Mel
2005-09-01 12:25, By: Meln, IP: [24.54.216.79]

L2: started 72t sepp and then became disabled1. Once you start a SEPP 72-T plan there are no additional withdrawals allowed without busting the plan.
2. Fortunately you have a separate IRA that you can use to make withdrawals without the 10% penalty because of disability, but make sure your disability qualifies as a TOTAL DISABILITY for this exception to apply.
3. Since you only have 8 withdrawals to date, you could bust the plan on purpose, pay the 10% penalty on the cumulative withdrawals, and then TRANSFER the SEPP 72-T balance to a separate IRA or to the rollover IRA. Then you can make taxable withdrawals without any 10% penalty.2005-09-01 13:53, By: dlztaxes, IP: [4.175.9.195]

L2: started 72t sepp and then became disabledStart by contacting the Custodian/Trustee where your SEPP IRA is held. When you contact discuss with them the date you became disabled and additionally the date that the Social Security Administration deemed you disabled.
Disability is an exception to the 10% penalty rule. In fact IRC Section 72 lists only two reasons available to change SEPP payments, death and disability. Depending on the date of your disability and how the Custodian/Trustee accepts the information, you may be able to have all (or most) of the current years payments exempt under the disability rule.
When discussing with the Custodian/Trustee, get their response in writing as to how they would handle.
Good luck! 2005-09-01 14:02, By: Gfw, IP: [172.16.1.72]

L2: started 72t sepp and then became disabledFWIW -I agree with Gfw. Death and disability are the two allowed reasons for discontinuing a SEPP. In many cases, the custodian will just process the distribution in accordance with your instructions. For instance, if you ask them to process the distribution as a disability’ distribution, they would process and report it as such. The key is to make sure that the IRS receives the proper notification. Since you will likely receive 2 1099-Rs for the same account for the year ( one showing Code 2 for the SEPP and the other showing code 3 for the disability), it may make sense to attach a letter of explanation to your tax return- although I think the code 3 on the second 1099-R should be sufficient notice to the IRS ( but what I think is not important ).
See the instructions for Schedule R-Form 1040 at http://www.irs.gov/pub/irs-pdf/i1040sr.pdf. This may be helpful. The custodian may require a copy of Schedule R-Form 1040 or a note from your physician, confirming your disability.
Please post any follow-up questions
2005-09-09 03:54, By: Denise Appleby, IP: [68.38.254.240]