Sounds like you already have a feel for this ... a 72t payment (part of a series of substantially equal and periodic payments) must be adhered to unilt age 59 and 1/2 (OR whichever is linger) to continue to have the penalty - 10% -waived)
Sorry or the typo ..."OR 5 years, whichever is longer"
What are thx ramification if I need money
Just that the 10% penalty is now NOT waived on the amount you take this year, that's over and above the amount of the SEPP payment, that's all
Wait this is an Ira I have been taking payments since January 2010 at age 57. I am now 61 How will the IRS treat this frm a tax stand point. In my readings I saw they can go back two years and treat this as a premature distribution and access penalties? Please explain in detail. Thanks
You've already (or should have) been paying tax on the money, it's just that the additional 10% penalty tax has been waived because of the 72t arrangement
OK hang with me here....
You are absolutely spot on ... they will go back and charge the 10% penalty on the years that you took the distribution BEFORE 59 and 1/2 ... however, once that happens and they have brought you tax account current, because you are now over 59 and 1/2 the $ are simply added to you income and taxes as regular income for the year you take it out (I'm assuming you already paid the tax on the money and simply did not apply the penalty IRA distributions of pre-tax money are ALWAYS taxable)
Because they WILL go back to the years before 9 and 1/2 and charge the 10% additional on THOSE distributions ... the 72t is null and void... but NOW you're just taking out distributions AFTER age 59 and 1/2 (the 5 year rule is no longer applied, once the 7t2 had been voided
they go back and get the 10% up to the time you would have been able to distribute without the penalty (age 59 and 1/2)
But now that it's done, you are like anyone else taking distributions from their IRA after age 59 and 1/2 ... it's taxable, but no additional 10% penalty
Yes I have paid taxes on all distibutions. Let me understand so they will assess a 10 percent penalty before 59 and a 1/2. on all distributions. Does the Irs also charge interest on those distributions before 591/2
Yes, they can, just a late payment penalty on the tax owed
You MAY, however be able to ask for an abatement for reasonable cause, however,
Here's what the Journal of accountancy says about firs time abatement of penalty:
[You] will not be disqualified from receiving an FTA based on lack of a clean penalty history if the client:
Still with me?
sOK ... just making sure you were there
Take your time... I'm here
What is a reasonable cause for an fta to be granted?
The IRS gives a long list of events that will be considered for reasonable cause. They are:
The Internal Revenue Manual goes on to say that any reason will be accepted as reasonable cause if it can be shown that the taxpayer exercised ordinary business care and prudence and, despite that, was still not able to comply with their tax obligations.
How is the late penalty calculated, More specifically is it calculated for each payment up until 1/2014 when I take the withdrawal. Thanks
Sure let me gt that for you ... while I'm doing that let me go ahead and give you the process for requesting abatement:
This is the actual process of requesting penalty abatement:
The IRS gives three ways to request an Abatement of Penalties:
Typically, a petition will comprise of a formally structured letter with an introduction, the request for penalty relief under which relief program(s).
Here's an excellent article on this (also discisses the reasonable cause abatement): http://taxes.about.com/od/backtaxes/qt/irs_tax_penalty.htm
Thank you can you send me our chat by Email. This has been very helpful. Thanks
So sorry ... JustAnswer won't let us do that HOWEVER, you can come back here: http://www.justanswer.com/tax/844zt-72t-started-age-57-first-payment-1-2010.html feel free to bookmark the page also (save as a favorite) ... you can also do a "file-print" from your browser and finally , once you rate my answer, this will stay on you home page, essentially forever
(you could also copy this and/or the address link I gave you and paste it into a word document)
Ok Thanks fir your help. I will review later
If this has helped, I would appreciate a feedback rating of 3 (OK) or better (excellent, is ideal)… That's the only I get credit for the work.
However, again, if you need more on this, please come back here, so you won't be charged for another question.
Thanks so much, and again, if it's on THIS issue just come back any time, and it will still be a part of THIS question
You got it thanks
You're vry welcome ... I'd definitely go for the abatement .. all they can do is say no
Also, see this: http://www.fixyourtaxproblem.com/tax-help/penalty-abatement.html
Thank you I gave you an excellent