What happens at the end of 72T plan
L1: What happens at the end of 72T planHi,
First of all, I wanted to say thanks to all the folks who have provided advice/counsel over the years. You truly are some of the most knowledgeable people regarding 72T SEPP plans, and I don’t know where I would have been without your help.
On to my question. I took my first distribution on Feb 6 2013, and have taken distributions on Feb 6 in each subsequent year. By Feb 6 2018, I will have taken 6 annual distributions, and met the 5 year/60 month requirement. However, since I will only be 59 on Feb 28, 2018, I haven’t met the age requirement. It is my understanding that in 2018, I won’t be able to take any additional distributions until Sept 1, 2018 (that’s when I turn 59 1/2 and will have met the 59 1/2 age requirement).
Once I hit 59 1/2, is there any documentation that I need to prepare or submit or notify anyone to inform them that I’ve satisfied the requirements for my plan ?
On Sept 1, 2018, since I’ll be 59 1/2, is my 72T plan technically ended and all of the previous 72T rules no longer apply (meaning I can now take distributions at any time, for any amount, knowing that I will need to pay income taxes on it, but no longer risk the 10% penalty).
I’m also guessing if I take that Sept distribution in 2018, it may likely get lumped together with the Feb 2018 distribution on the 1099R…and the IRS could possibly question me, but as long as I have the records showing the date of the Sept distribution being after 59 1/2, I should be ok..right ?
Hope that wasn’t too long winded. Thanks for your input.
2016-12-08 05:53, By: Jason, IP: [188.8.131.52]
L2: What happens at the end of 72T planJason, you do not have a 5 year plan since you reach 59.5 after the 5 years has passed. Since you will have taken at least 5 years of distributions by the end of 2017, you have 3 options for 2018 before the plan ends in August.
1) Take out a full annual amount
2) Pro rate by the month by distributing 7/12 of your annual amount
3) Take out nothing
On 8/29/2018 your plan automatically terminates. You do not have to report anything to the IRS about the end of your plan, but for any distributions you took earlier in 2018, you will probably get a 1099R coded 1 and have to file a 5329 to claim the exception.
After the plan ends, you have no restrictions on distributions. If you take another distribution after 8/28 it will be reported on a different 1099R because the code changes to 7. Not a problem, because the IRS will see from the 1099R that the additional distribution was done after 59.5 even though line 15 of your return may show a different total than prior years.
2016-12-09 02:51, By: Alan S, IP: [184.108.40.206]
L3: What happens at the end of 72T planEven though nowhere on the 1099-R is there any place to indicate the date that you took the distribution. The IRS trusts that the payor knows that it was after 59 1/2, which is why they coded it “7”.2016-12-09 05:49, By: dlzallestaxes, IP: [220.127.116.11]
L4: What happens at the end of 72T planthanks, dlz2016-12-10 01:28, By: Jason, IP: [18.104.22.168]
L2: What happens at the end of 72T planThanks, Alan…very helpful.2016-12-10 01:27, By: Jason, IP: [22.214.171.124]