IRA 72(t) Distributions
I have a prospective client that wants to transfer 100% of her IRA from one custodian to another so that I can manage her account. My question is, “Will there be any modification or tax issues in doing this transfer as long as the 72t distribution amount remains the same and there is no additional money added or distributed from the account?
Permalink Submitted by Brian Bushman on Tue, 2013-07-02 20:29
So, if the client is currently taking monthly distributions and withholding tax monthly, would it be better to take the remaining distribution for the year now in order to transfer now or to continue monthly distributions and transfer the account at the end of the year? Or would it matter?
Permalink Submitted by Alan - IRA critic on Tue, 2013-07-02 22:34
Either way would be better than transferring now and taking the remaining monthly distributions from the new account. Since this is a total transfer of the IRA account funding the plan, it really should not matter but any additional attention from the IRS is better to avoid when a 72t plan is in effect. Also, the coordination, communication and the math could result in an error if both accounts fund the 72t plan. The two 1099R amounts would then not total to the exact correct amount. Finally, note that if monthly distributions are to be reinstated starting Jan, 2014 it is best to have the distributions made between the 5th and 15th of the month such that there would be 15 days left in December to correct any errors, ie either to request a special additional distribution if the year to date total is short or to roll back the December distribution if the amount to date is excessive.