If a client takes substantially equal, periodic payments from a non-qualified annuity that EXCEED the amount calculated under 72(t)/(q) rules, how is the excess withdrawal treated for tax purposes? For example, at age 51, using the max 72q calculation, my client should be able to take out $681 (ish) per month. His account is spinning off about $720/month. If he takes the full $720, what are the ramifications. I assume it would blow up the 72q exception all together and he would have to pay full freight (tax/penalty) on the distributions?

Note: He doesn’t have to take the full income stream, and likely won’t…I’m just curious about the impact.

Thanks in advance! Kyle