72(t) – SEPP & SSDI
My question was sort of addressed in https://irahelp.com/forum-post/15126-72t-and-disability however mine is a slightly different twist. My situation is as follows:
1. I am a 56 year old
2. I have a traditional IRA which I have been taking a SEPP/72(t) since 2008.
3. I have not yet taken my distribution in 2021.
4. I recently received a finding of disablility from SSA which has been assigned an onset date in September 2020.
5. Back pay will only be for Feb-Apr of 2021 so nothing effects prior tax years.
My questions are as follows:
A. Can I suspend/stop my SEPP/72(t) immediately & permanently?
B. If yes, how do I need to communicate this to my IRA custodian?
C. If no, why not?
As I am sure folks in this forum already know a mistake could be very costly tax wise if I were to stop the 72(t) but was not legally allowed to do so. My IRS enrolled agent friend said that a formal IRS opinion would be costly and would attract unnecessary attention.
Any help or substantive advice would be greatly appreciated.
DA
Permalink Submitted by Alan - IRA critic on Mon, 2021-05-24 23:02
Yes. Your SEPP terminates if you are disabled according to Sec 72(m)(7). You should get a written statement from your MD that you meet that requirement, which is total disability. If so, your plan can terminate at the end of 2020. Also provide the MD statement to your IRA custodian and request that all future distributions be coded 3 (disability). That will waive the penalty without the continued restrictions of the SEPP plan.
In effect, your SEPP continues to the later or 5 years or 59.5, but also terminates upon your death or total disability.
Permalink Submitted by Drew Alexander on Tue, 2021-05-25 16:23
Alan.Could I use the written findings & decision from the ALJ (Administrative Law Judge) in his decision as my disability is the confluence of multiple conditions. I do not want to go back to each of them and ask them to write something. it is ALL the conditions that constitute disability approval.