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Posted by Arthur Kamlet on July 1, 2009, 11:03 pm
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>I am 55 YO as of last month. I have several IRA accounts. I plan to
>invest in 4 year CD's (Annual Yield ~ 3.2% paid monthly)in each account
>and withdraw exactly the yield amount as not to affect the principal for
>next 4 to 5 years. Will this qualify as a 72T distribution? Is there any
>reporting required?
You are referring to that portion of 72(t) that allows you to establish
a series of Substantially Equal Periodic Payments (SEPP) plan which you
must follow for at least 5 years and until you reach age 59 1/2.
The amount distributed each year under the SEPP plan from this particular
IRS account, and the SEPP applies to a particular account, not all the
moneys in your IRA, has to be calculated as that amount which drains your
account to zero at the end of your statisticallly-determined lifespan.
So you need to choose the account and calculate the annual SEPP amount
and not deviate from it for the whole time you're followin the SEPP plan.
Deviate from it, and all the distributions from the first year on the
plan could be subject to the 10% penalty.
IRS Pub 590 gives a safe harbor method of calculating the annual
distribution, meaning if you follow that method the IRS will not
challenge it. Other methods exist and you should consult with
a local tax professional familiar with SEPP calculations if you
plan to use another method.
Your method does not rely on distributions from one IRA account and
there's no indication the amount is correctly calculated under an
acceptable method, so you have not shown it meets the rules to be a
proper SEPP plan.
=============== ============
While on the subject of SEPP plans, I have seen over the past few
years more and more large IRA custodians, including a giant financial
institution in Boston, quite willing to set clients up with an SEPP
and distribute the SEPP amounts, but they now code the 1099-R with a
"1" meaning taxpayers have to file a form 5329 to avoid a nasty CP2000,
or pay their tax preparers to do this for them.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
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