The year you turn 59 /12

L1: The year you turn 59 /12I was 59 1/2 on January 1st, 2007. (BD is July 1st). I had withdrawn the exact same amount for 6 years-2001 through 2006, so 59 1/2 was “longer”. I still withdrew the same amounts, from 2 sources, in 2007. One reported a code 2 on the 1099 (WM Financial)explaining that the year you turn 59 1/2 still requires the final 72T WD, since >5 years had elaped. The other one (CUNA)reported a code 7-normal distribution. Their understanding is that once I turn 59 1/2 normal distibution rules applied. Help. Who is correct? Provided 5 years had elapsed, is a SEPP required in the year you turn 59 1/2?2008-03-06 09:10, By: Walt R, IP: [96.229.243.92]
L2: The year you turn 59 /12I believe there areseveral different aspects being confused.
First, you must continue a SEPP 72-T plan until the later of age 59 1/2 or 5 years in the plan. You satisfied the time-period requirement once you reached 59 1/2 in your case. You did not “bust” it as of that point.
Second, you must take your annual contributions for at least 5 calendar years, which you did.
Third, distribtions after 5-years or age 59 1/2 are not subject to SEPP 72-T regulations. You can stop, and usually do stop, your SEPP 72-T plan at that point. You can stop, increase, or reduce your withdrawals at that point.
Fourth, the IRS has ruled that those born on 1/1 become their attained age as of 12/31. I do not know if they have extended that to the 59 1/2 scenario or not, and don”t expect them to ever be consistent.

So, I think the only point is whether or not you would be REQUIRED to take any distribution in 2007. If you were, you could have done it prorata at 1/12 of the annual amount, but could also have taken the full annual amount..
I think the “7” code is correct, but either way it is taxble to the same extent, so I would just file the 5329 as opposed to making an issue over something that really doesn”t matter taxwise.2008-03-06 12:48, By: dlzallestaxes, IP: [151.199.255.7]

L2: The year you turn 59 /12So, the bottom line is that a person, in the year they turn 59 1/2, is not required to continue the plan, as long as 5 years elapsed. Is that correct? Or, they must take it only until the birthday? There is no question about taxes, or even if its the same annual amount as past years, but it seems to me, since I turned 59 1/2 in 2007, I had to contimue the plan, and that would dictate a code 2. No?
If I report a code 2 for one company and a code7 for the other, rather than 2 code 2”s as in past years, would that not be a red flag? I plan to file electronically (Turbo Tax). Do you know if I can file the 5329 electronically as well, or must I use snail mail. Thanks much.2008-03-07 07:02, By: Walt R, IP: [96.229.243.92]

L2: The year you turn 59 /12So, the bottom line is that a person, in the year they turn 59 1/2, is not required to continue the plan, as long as 5 years elapsed. Is that correct? Or, they must take it only until the birthday? There is no question about taxes, or even if its the same annual amount as past years, but it seems to me, since I turned 59 1/2 in 2007, I had to contimue the plan, and that would dictate a code 2. No?
Let me try this. A SEPP Plan runs for 5 full years, starting from the date of your first distribution, AND you reach age 59 1/2. When these two conditions are met, you may make changes to your distribution amount … increase, decrease or whatever works for you. In your case, the 5-year condition was met before the age requirement. Beginning 1/2/07, you could make changes or continue with the established distributions which seems to be what you did.
Different custodians report differently for the year you reach age 59 1/2. Some will continue reporting as if you arestill under 72(t).Others will report two Form 1099-R”s … one under 72(t) rules and one for normal distributions after age 59 1/2, even if you have not satisfied the 5-year rule. Neither is right or wrong.
If I report a code 2 for one company and a code7 for the other, rather than 2 code 2”s as in past years, would that not be a red flag? I plan to file electronically (Turbo Tax). Do you know if I can file the 5329 electronically as well, or must I use snail mail. Thanks much.
Whatever you do, DON”T change the codes reported on Form 1099-R! That will raise the red flag and cause problems! Simply work through Turbo Tax, loading the date you are given on the different Form 1099-R”s, and as you get to the end of the program you will be asked questions that will bring up the Form 5329 to solve all of your problems.
Jim2008-03-07 08:10, By: Jim, IP: [24.252.195.14]

L2: The year you turn 59 /12Jim, regarding your note that I could make changes on 1/2/07. Here is the IRS reply. It differs.
NOTE: Our response to your tax law question appears below. If you have a follow up question or another general tax law question, please visit our web site at: (http://www.irs.gov/) to submit it. Please do not use your “reply” button to respond to this message. This E-Mail address is non-returnable and will not accommodate replies because of current limitations to our system. More helpful information is provided at the end of this message.Dear Taxpayer, Thank you for your inquiry on 3/5/08. I understand that are receiving monthly distribution per the 72t rule and your question is regarding whether you are required to take a distribution in the year that you turn 59 1/2 if you turn 59 1/2 on Jan 1st. The 72t rule states that withdrawals should be made for at least 5 years or until the plan participant reaches 59 1/2 whichever is the longer period of time. If the longer period of time is age 59 1/2, you would be required to take a final distribution in the year that you turn 59 1/2 no matter what the date and month is. This distribution would not be considered a normal distribution, however, it will still be a distribution that meets an exception. I hope that this information addresses your question, if you have additional questions please call 1-800-829-1040. 2008-03-20 08:58, By: Walt R, IP: [96.229.94.183]