When can I stop SEPP distributions?
I began taking SEPP distributions from my IRA in Jan ’03 using the amortization method and monthly distributions. To date I have taken distributions for 5 years (60 months). I will turn 59 1/2 later this year. May I discontinue monthly distributions at that point, or must I continue taking them through the end of this year, so that the annual distribution amount for ’08 is the same as for ’03-’07? I do not want to run afoul of IRS regs this late in the SEPP game. Thanks.
Permalink Submitted by Alan Spross on Mon, 2008-01-21 18:11
You do not have to take the distributions in the month you turn 59.5 or beyond, since you have already met the 5 year requirement.
For example, if you reach 59.5 in July, then June is the last month in which you must take your monthly distribution.
The IRS has made very few if any rulings on a final “stub year”, so it is nice to know they are not picky about it. Still, if your monthly distribution date has been earlier in the month than the day you reach 59.5, it does not present any problem if you take that distribution in the month you actually reach 59.5.
You will likely get two 1099R forms for 2008, one coded “normal” for distributions you take after 59.5, if any. For the earlier months, they will probably use either code 1 or 2 depending on how they code 2007. If they use a “1”, then you need to file 5329 to claim the exception.