72T Annual Distribution
I started my 72T Plan last year and got my first annual distribution on April 14, 2022. I have a CD maturing this coming February on this IRA (72T account). Is it OK to advance my annual withdrawal this year and get it when my CD matures this February? Or do I need to wait for April 14, so I will not screw up my 72T plan?
I will wait for your reply. Thank you so much in advance.
Permalink Submitted by Alan - IRA critic on Mon, 2023-01-16 18:16
You can take your 72t distribution at anytime in the year. That said, it is difficult to manage CD maturities within a 72t plan, particularly if you have several bank or CU CDs. It’s easier if your IRA has brokered CDs in it and also holds other non CD investments from which you can take your 72t distribution. How many IRA accounts are included in your 72t plan, and how many of them are bank CDs?
Permalink Submitted by Nelie Cruz on Tue, 2023-01-17 17:22
There is only one IRA account in my 72T plan. I have 4 brokered CD’s in a ladder, one maturing this coming February, another one in six months, another one in a year and another one in two years. I also have investments in mutual fund stocks.Thank you so much for your reply.
Permalink Submitted by Alan - IRA critic on Tue, 2023-01-17 18:08
That’s a good structure and simple to manage. If these brokered CD rates ever get non competitive you should not attempt to spin off transfers to bank CDs. Either live with the lower brokered CD rates or use bond funds instead and leave the present IRA brokerage account intact.
Permalink Submitted by Nelie Cruz on Thu, 2023-01-19 16:38
Thank you for your advice! Much appreciated!
Permalink Submitted by Nelie Cruz on Thu, 2024-01-11 18:01
I started my 72T Plan in April 2022. Will IRS ask for any documentations about my 72T plan? If ever they do. What documents should I send them?I will wait for your reply. Thank you so much.
Permalink Submitted by Alan - IRA critic on Thu, 2024-01-11 19:07
It’s always possible that they could challenge your plan, including your calculation or an execution error, but this is unlikely. If they do, they might request a copy of your initial calculation and then compare it with the 1099R forms issued each year. I assume you filed a Form 5329 with your 2022 return claiming the exception if the 1099R showed code 1 in Box 7. Unless box 7 has code 2, you will have to file a 5329 with each tax return to claim the penalty exception. If you don’t the IRS will likely bill the 10% penalty plus interest.
Permalink Submitted by Nelie Cruz on Thu, 2024-01-11 19:25
Yes, I filed form 5329 with my 2022 Tax Return.
Permalink Submitted by Nelie Cruz on Fri, 2024-07-12 17:42
Hi Alan,
Good afternoon.
Can I increase the state tax rate that is being withheld from my 72T Distribution? I am not changing anything on the annual gross distribution, just the amount of tax that will be deducted. I would like to get a refund on my state return instead of paying. Is this allowable?
Thank you so much. Will wait for your reply.