Full Transfer of IRA with Sepp 72T
Hi all – I have a client who has an IRA at another firm that she would like my firm to manage. She is 3 years in on a 72T payout. I have read that there are potential problems with partial transfers of IRAs in the midst of a 72T payout. If she transfers the entire account and does not change the payout schedule, would that avoid any issues and/or red flags to the IRS? Thanks so much for the input!
Permalink Submitted by Alan - IRA critic on Wed, 2014-07-30 02:27
Yes, there should be no problems with a full transfer, but the IRS has busted a couple of plans that did a partial transfer (PLR 2007 20023, PLR 2009 25044). The movement of funds to the new IRA custodian should be done by direct trustee transfer to preserve an indirect rollover for correction of any distribution that exceeds the calculated amount. Careful attention will have to be made to the total annual distribution amount since 1099R forms will be issued by both custodians for the year of transfer, but I would not classify that as a red flag. And if not already the case, a 5329 will likely need to be filed to claim the SEPP penalty exception.
Permalink Submitted by Samuel Dippold on Mon, 2014-08-04 11:53
Thank you for the help!