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Hi, I have been receiving monthly payments of $2,600 from

Hi, I have been receiving monthly...
Hi,

I have been receiving monthly payments of $2,600 from a 72t for 14 years. I am 57. Is it possible to change the distribution method to quarterly, semi-annually or annually without incurring any type of penalty?
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Answered in 9 minutes by:
1/4/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Thank you for your question, and thanks for using JustAnswer.com.

Thank you for your question! Revenue Ruling 2002-62, 2.03(b) allows a one time change to the Minimum Distribution method if the current plan was based on either the Amortization or Annuitization methods.

Other than that, any change you make once you have begun drawing payments may make you susceptible to retroactive interest and penalties. SOURCE

Please let me know if you need anything additional. If you don't want monthly payments, perhaps set them to an account which you draw out the funds with the frequency you desire.

Please let me know if you need anything additional. Thanks again for using JustAnswer.com and have a happy, and safe 2013.

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You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

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Customer reply replied 4 years ago

Thanks for the answer. This was set up on the annuitization method. I am not wanting to change the amount distributed annually, but rather the frequency to semi-annual from monthly. I do still want to receive the distributions but would rather receive approx. $16,000 twice a year rather than $2,600 monthly. Is this allowable?

The IRS views your distribution as an annual amount, not a monthly amount. Therefore, so long as you are taking the same annual distribution, the frequency doesn't matter. This is a general approach - there is a more conservative approach to take.

The conservative approach, since there's no black-and-white ruling from the IRS that you could change payment frequency is to not change anything once distributions start. However, there have been no known issues from the IRS resulting from someone changing their payment frequency - they just get an annual 1099-R from the plan custodian that tells them what you took.

SOURCE

Hope this helps. Thanks for using JustAnswer.com and have a happy, and safe 2013.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site*
You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

Megan C
Megan C, Certified Public Accountant (CPA)
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Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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