Changing SEPP mid year to RMD
does anyone know if you can change the SEPP calculation method mid year from annuitiztion to RMD? I have not been able to find any revenue rulings, only a paper from a CPA stating that if the client switches calculation 6 month into the year that you have to only take 1/2 of the annual RMD amount?
Permalink Submitted by Alan - IRA critic on Mon, 2013-03-11 23:20
Notice 2002-62 infers that the one time switch to RMD can only be made in a subsequent year to a year in which distributions are made under one of the fixed dollar methods. Doing a mid year pro rated switch is therefore inviting IRS scrutiny which could possibly bust the plan. However, this early in 2013 if a client has not taken too much out of the IRA, a retroactive switch to RMD effective 1/1/2013 might be possible. Just figure the 2013 distribution under the RMD method and compare it to the amount already distributed. If RMD results in a higher distribution than the amount already distributed, client could simply make the change effective 1/1/2013 and any complex pro rating would be avoided. As in all such cases, the calculation should be fully documented in the event the IRS inquires, since the distribution for 2013 would typically be less than last year. Otherwise, there is no special reporting on Form 1040 for the one time switch.