72T
Hello All,
I have a simple question. Once the annual dollar amount is calculated for a 72T distribution, is the client allowed to take that distribution in varying amounts during the distribution year as long as they meet the annual dollar amount required by the calculation.
The client is in the first year and wants to take a distribution of 10,000 right away and then 4,000 per month Jully 2009-December 2009 for a total of 34,000.
Can this be done?
Thanks,
Scott
Permalink Submitted by Alan Spross on Sun, 2009-05-31 00:20
Scott,
In the first year, the client can take out either the full annual amount OR can take out the pro rated amount based on the month of the first 72t distribution. Whatever option is selected, it does not matter how the distributions are spaced. The IRS will only be concerned with the total amount distributed on Form 1099R, although the coding in Box 7 must be addressed. If the code for the 72t amount is not “2”, then the client needs to attach Form 5329 to their return to show exception “02” applying.
If monthly distributions are set up, using a date around the 10th of the month works best. If a date late in the month is used, then there is no time to make corrections if the December payment gets messed up and the client is trying to get resolution in the year end Holiday rush. The client can also change the distribution pattern from year to year as well as within a calendar year. These plans are calendar year based.
Permalink Submitted by Scott Capone on Sun, 2009-05-31 21:32
Thanks