Permalink Submitted by Peter Lingane on Fri, 2014-02-14 00:42
It is a distribution after separation from service at age 56 with no 72t exception applying. Participant rolled his 401k to an IRA and, a few months later, took a substantial distribtuion from the IRA. Participant thought that the penalty exceptions for pension plans appled to IRAs as well. True reason for abatement: participant chose to rely on his personal judgment becasue he did not want to pay for professional advice. I’m looking for a reason to put on the tax form, and some indication of the rate of success by others in like circumstances.Its too late to roll the payment to another IRA. He could seek an exemption from the 60-day rule – if he could find someone to blame.The distribution was too large to be the first of a series of substantially equal payments.
Permalink Submitted by Alan - IRA critic on Fri, 2014-02-14 02:17
This is a fairly common error, but I am not aware of any path to eliminate the penalty, barring a different penalty exception that might apply to the IRA distribution or part of it. There is probably no good evidence that he planned to roll the IRA distribution over within 60 days either, such as a sudden illness, death in the family etc. Therefore, I would not pay for a PLR to allow a late rollover given the cost of the request vrs the unlikely chance of a favorable filing.
Permalink Submitted by mk foss on Fri, 2014-02-14 04:28
The IRS can abate a penalty the first time it occurs but this is not really a penalty. It is an excise tax and is not subject to the penalty waiver rules.
Permalink Submitted by Alan - IRA critic on Thu, 2014-02-13 21:59
Please supply some data as to the situation. What type of distribution does the penalty apply to and what reason to appeal the penalty?
Permalink Submitted by Peter Lingane on Fri, 2014-02-14 00:42
It is a distribution after separation from service at age 56 with no 72t exception applying. Participant rolled his 401k to an IRA and, a few months later, took a substantial distribtuion from the IRA. Participant thought that the penalty exceptions for pension plans appled to IRAs as well. True reason for abatement: participant chose to rely on his personal judgment becasue he did not want to pay for professional advice. I’m looking for a reason to put on the tax form, and some indication of the rate of success by others in like circumstances.Its too late to roll the payment to another IRA. He could seek an exemption from the 60-day rule – if he could find someone to blame.The distribution was too large to be the first of a series of substantially equal payments.
Permalink Submitted by Alan - IRA critic on Fri, 2014-02-14 02:17
This is a fairly common error, but I am not aware of any path to eliminate the penalty, barring a different penalty exception that might apply to the IRA distribution or part of it. There is probably no good evidence that he planned to roll the IRA distribution over within 60 days either, such as a sudden illness, death in the family etc. Therefore, I would not pay for a PLR to allow a late rollover given the cost of the request vrs the unlikely chance of a favorable filing.
Permalink Submitted by Peter Lingane on Fri, 2014-02-14 02:22
You are confirming my syspicions. Thank you. Anyone disagree?
Permalink Submitted by mk foss on Fri, 2014-02-14 04:28
The IRS can abate a penalty the first time it occurs but this is not really a penalty. It is an excise tax and is not subject to the penalty waiver rules.