72(t) Distribution
Assume that a taxpayer (age 52) set-up a 72(t) and the calculation amount came to $12,000 (annually).
If the taxpayer withdrew the full $12,000 on 10/31/07, can he start taking monthly distributions for $1,000 starting January 2008 until he reached 59 1/2?
The question is – would the change in this frequency be considered a modification to the 72(t) program (resulting in penalties)?
Permalink Submitted by Alan Spross on Wed, 2007-10-31 22:28
The change to monthly distributions does not present a problem. For 2007, if the first distribution is received in October the taxpayer has the option of taking either 3 months worth or the full annual amount prior to year end. For the following calendar years, the exact annual amount must be taken, but the frequency does not matter. This can be changed without limit, however these types of changes do increase the risk that the correct annual amount is not taken, ie frequent changes cause the risk that the plan would be busted by taking the incorrect cumulative annual amount.