Starting new SEPP … Am I on the right track?
L1: Starting new SEPP … Am I on the right track?Hi, I’m starting a new SEPP and want to run my thinking past you all. I’ve tried to find a live CPA who knows about a SEPP, but that’s been a challenge. It seems that I know more than they do 🙁 … all thanks to this site.
So, here goes:
52 year old single woman DOB: 7/02/63
Date of first distribution 8/02/2015
IRA for the SEPP, current balance 684,000
Additional separated SEPP balance 182,000
I’m using the Amortization Method, Not Joint, Not prorated 1st year.
So, my questions:
1) Must I use the Maximum Interest Rate for the time period of Aug 1 – Aug 31? It’s at 2.12% and gives me a yearly withdrawal of 29463 vs the 1.92% giving me 28613.60.
2) As for the exact balance that I start my distributions on, shall I just use the end of July statement for my account?
3) Can I take disbursements in any way during the year, as long as I hit the correct number by Dec 31st. In particular, I may want to take monthly withdrawals for a few months, then pull the rest out in one lump some.
4) I’m assuming that I can pull money out of my other IRA for things like educational expenses or first time homebuyer, without busting my SEPP. But how does that look on taxes? How do you do that so that the IRS doesn’t think I pulled more than I’m allowed?
I think that covers it. Thanks in advance for your help!
Judy2015-07-23 22:13, By: Judy, IP: [220.127.116.11]
L2: Starting new SEPP … Am I on the right track?Judy,
1) You can use a lower interest rate than the max and it does not have to be the published rate forany month,and that will reduce the calculation for a given IRA balance. For example, you could use 2% even.However, we recommend that you use the highest rate(2.12)which will enable you to transfer some of the SEPP IRA balance to your non SEPP IRA account before you start your plan. You would end up with the same distribution amount, buta lower balance in the SEPP account and a higher balance in the non SEPP IRA.Be careful with an initial distribution date around the first of any month. 8/2 is a Sunday, but you don’t want to get a July distribution by mistake as that would eliminate use of the July rate.
2) Month end July statement would be good for determining the account balance. It is convenient because in most cases you can print off the monthly statement to document your calcs in most cases. Again though, if that is what you want to do, take your distribution around the 10th of August, not right on top of the date you are using for the calcs.
3) Your distribution dates and pattern can vary as long as your annual total is exactly right. Take your final distribution before the year end holidays to eliminate any chance that it is not processed on time. The Dec distribution is the critical one because there are no corrections or adjustments possible after year end.
4) That is correct. Having the non SEPP account gives you flexibility and provides a form of insurance for your SEPP.You and the IRSwill receive a different 1099R for each IRA account, and while you will report the total on line 15 of your 1040, you will need to use the multiple reason code 12 on your 5329 if you qualify for a penalty waiver on the non SEPP IRA distribution.2015-07-24 00:45, By: Alan S, IP: [18.104.22.168]
L3: Starting new SEPP … Am I on the right track?We usually recommend using the highest month-end balance over the past few months, up to 6 months ago.2015-07-24 03:40, By: dlzallestaxes, IP: [22.214.171.124]
L4: Starting new SEPP … Am I on the right track?Would I only use the highest month-end balance over the past few months if I wanted to maximize the amount? If I just used the July statement, and was happy with that yearly distribution, wouldn’t that be ok?
Truthfully, I’m hoping to use the distributions to supplement my income, and if I don’t need it, I’ll reinvest what I don’t need in my after-tax account.2015-07-24 15:09, By: Judy, IP: [126.96.36.199]
L3: Starting new SEPP … Am I on the right track?Thanks Alan, for your advice. I think I feel ready to go. I will plan on waiting till around the 10th to get started. 2015-07-24 15:12, By: Judy, IP: [188.8.131.52]
L2: What keeps me from making a change?So, I’m wondering. I’ve just started my 72t plan. I took my 2nd monthly withdrawal this week. The amount that I’m withdrawing is more than I really need. In light of the recent downturn in the market, if I did the calculations with today’s numbers, I would be pulling less of course. Could I recalculate how much I’m going to take now, and use todays numbers? So that at the end of the year (and then subsequent years) take a yearly smaller amount?
I guess I don’t understand how the IRS knows what the initial numbers and assumptions that the 72t was started under. There isn’t a 72t start up form to file…
What am I missing?
2015-09-11 12:09, By: Judy, IP: [184.108.40.206]