Permalink Submitted by mk foss on Thu, 2010-09-23 18:17
The 72t payments are done on a calendar year basis – but there is some flexibility. If you’re doing annual payments they don’t need to occur in the same month each year. You could start in December in the first year and take the annual payment in January of the next year.
If you’re doing quarterly payments and start in September – you could do a third and fourth quarter payment in the same year. There’s less flexibility with monthly payments.
Permalink Submitted by Alan Spross on Thu, 2010-09-23 20:09
Just to clarify the quarterly payment statement, if the plan is started in September, the options for the first year are to distribute either a full annual amount OR a pro rated amount by the month, ie 4 months of distributions. That could be composed of 1/6 the annual amount in September and the other 1/6 in either of the remaining 3 months. Taxpayer could not take out a 3 month quarterly payment in September and another 3 month quarterly payment in the last quarter of the year because that would total to 50% of the annual figure.
While a 72t plan can start in any month, for the years between the first and last stub years, the plan operates as a full calendar year plan in all respects. But if you start a plan in September, your first stub year always ends in December, you cannot maintain the plan from Sept through August for each year of the plan.
Permalink Submitted by mk foss on Thu, 2010-09-23 18:17
The 72t payments are done on a calendar year basis – but there is some flexibility. If you’re doing annual payments they don’t need to occur in the same month each year. You could start in December in the first year and take the annual payment in January of the next year.
If you’re doing quarterly payments and start in September – you could do a third and fourth quarter payment in the same year. There’s less flexibility with monthly payments.
Permalink Submitted by Alan Spross on Thu, 2010-09-23 20:09
Just to clarify the quarterly payment statement, if the plan is started in September, the options for the first year are to distribute either a full annual amount OR a pro rated amount by the month, ie 4 months of distributions. That could be composed of 1/6 the annual amount in September and the other 1/6 in either of the remaining 3 months. Taxpayer could not take out a 3 month quarterly payment in September and another 3 month quarterly payment in the last quarter of the year because that would total to 50% of the annual figure.
While a 72t plan can start in any month, for the years between the first and last stub years, the plan operates as a full calendar year plan in all respects. But if you start a plan in September, your first stub year always ends in December, you cannot maintain the plan from Sept through August for each year of the plan.