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Yearly Recalculation of SEP

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Last Updated On
ByBob S

L1: Yearly Recalculation of SEPHello Gordon
First let me thank you for this wonderful site and all the help you have given me over the last few years.
I am planning on doing an annual SEP recalculation and I wanted to run it by you to make sure I am doing it by the numbers.
Plan started 1/1/03. (First monthly payment)
I am using the SEP account balance as of 12/31/03,the Dec ’03 interest rate of 4.26% and 29.6 years life exp for the recalculation.
According to the calculator, I will need to withdraw an additional $19,211.76 in Dec (prior to years end) to have taken the correct recalculated ammount for 2004.
I am planning on doing that after I receive the Dec monthly payment.
A few questions:
1) I will now have to recalculate each year using the account balance as of 12/31 of each preceeding year. Once you recalculate you must do soeach year. Yes?
2) Interest rate used will be the 120% rate (from your table) for either of the two preceeding months (Nov, Dec) or am I restricted to using Dec only since that is the month I will use for this year?
3) What kind of paper trail should I keep for the IRS?
Thanks again for all your help.
Best Regards
Bob
2004-11-22 16:19, By: Bob S, IP: [172.195.21.53]

L2: Yearly Recalculation of SEPHello Bob:
I think you meant to say that your plan started 1/1/04; not 1/1/03. If that is correct then athe answers to your questions are:
1. Yes.
2. I think either the Nov. or Dec. rate will be fine.
3. Lots. Actually, annually recalculated plans require substantial documentation; justg like any other plan, but the require it every year. Without delving into the details I am going to make a self-serving recommendation. At the home page, go buy the book ($55) and read the section on “Evidence”.
TheBadger
wjstecker@wispertel.net.
2004-11-23 09:04, By: TheBadger, IP: [66.250.23.23]

L2: Yearly Recalculation of SEPHi Badger
Plan did start 1/1/03. I did not specify annual recalculation in the original plan paperwork.
Is this an automatic disqualifier with the IRS? (Plan will Bust)
Is there any way to avoid busting as I’m 23 months into the plan?
Regards
Bob2004-11-23 09:34, By: Bob S, IP: [172.196.58.74]

L2: Yearly Recalculation of SEPHello Bob:
The situation is not impossible; it just got 10X more complicated. Drop me a note with all of the details if you like.
TheBadger
wjstecker@wispertel.net
2004-11-23 10:09, By: TheBadger, IP: [66.250.23.23]

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