Tax Filing

Submitted by Scott Lojewski on Tue, 2017-12-26 17:37

I have been filing my own taxes for over 30 years with no problem, mine are very simple it is just me although this year I took early retirement and have a 72T program going on that I started in July I did however move my IRA’s to a new custodian and will be changing my distributions from the amortization method to the RMD starting in January I am only drawing from 1 IRA. I am trying to decide if I should keep doing my taxes myself (which I think is fine) or should I take them to a CPA.



Submitted by Alan - IRA critic on Tue, 2017-12-26 20:04

  • There is no special filing requirement to make the one time switch to the RMD method. You simply report your total distribution amount per Form 1099R on line 15 of Form 1040. You also file a Form 5329 to claim the penalty exception 02 because your 1099R will probably be coded 1 because the custodian chooses not to verify the accuracy of your calculation. Therefore, filing your return remains simple.
  • The challenge is correctly calculating your 72t distribution. You should document your calculations and keep a record of them in the event the IRS ever questions your plan. For your 2017 distribution you have a choice of taking out either a full annual or 6 months worth, so right now you should verify the calculation and make sure your distributions total the correct amount as there is only a couple days left to make any changes, and with some custodians may already be too late. The RMD method will reduce your annual distribution considerably so be sure you can live on the reduced amount. You will also need to do a new calculation every year, using your age at the end of that year, the account value on 12/31 of the prior year and the correct divisor from one of the IRS approved tables, usually the single life table. Keep a copy of each year’s calculation.
  • Note that many CPAs will not be familiar with these plans, so if you use one you will also have to screen out the ones that are not familiar with the plans and calculations.

Submitted by Scott Lojewski on Tue, 2018-01-02 16:55

I just got of the phone with Vanguard who is my new custodian and they asked me to do the calculation for my 72T which I did using Bankrate, (I did save the calculation page) and they are just going to have the RMD amount put in my checking account each month they did not have me fill out any forums at all so at the end of the year I will just have to fill out the 1099 and the 5329 and that is basically it for 2018. The 2017 plan was with another custodian.

Submitted by Alan - IRA critic on Tue, 2018-01-02 17:25

VG will issue the 1099R, you only have to complete the 5329 with your tax return. Suggest you have VG make the distribution to checking on a date between the 8th and 22nd of the month to avoid risks of year end processing errors that would bust your plan. Also, the 72.net site is still active and only the URL was changed.

Submitted by Scott Lojewski on Tue, 2018-01-02 18:17

say my RMD is distribution is $1,300.00 a month max and I want vanguard to wihold 10% so dose that mean they withold $130.00 and $1,170.00 goes in my checking account.

Submitted by Alan - IRA critic on Tue, 2018-01-02 18:43

Yes. When you request withholding you have to remember that your 72t plan is based on the gross amount distributed, not the net that goes into your checking. The gross annual amount will show in Box 1 of your 1099R (15,600 in your example). The amount withheld (1560) will go in another box on the 1099R.

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