cassieandcameo
Jul 11, 2007, 08:37 AM
I have a friend who set up a 72T withdrawal account to make five substantially equal withdrawals within 5 years from his IRA since he needed the money and was not yet 59 1/2. He is desperately trying to avoid a tax penalty here for early withdrawal from his IRA if he violates the 72T rules. He is paying taxes on these withdrawals so that is not the problem.
I hope I can ask this question clearly. He made his first withdrawal at the end of the calendar year in November of 2004. He received his 2nd withdrawal in January of 2005, 3rd in January of 2006, 4th in January of 2007, and will receive the 5th in January of 2008.
Can he consider the 72T arrangement satisfied in January of 2008? He will be 60 by then and wants to start taking regular withdrawals from his IRA without tax penalty at that time. Or must he wait until November of 2009 which would be 5 calendar years from when he received the first payment?
His investment company first said he could consider the 5th payment the end of the 72T. Then they came back and said that "technically" he had to wait until November of 2009. Then they came back and said that other people have terminated the 72T at the end of the 5 year period and IRS hasn't had a problem with it.
He's trying to be cautious because it could cost him over $10,000 if he makes a mistake. I tried to research the tax code for him but that was a bust.
Any help would be greatly appreciated.
I hope I can ask this question clearly. He made his first withdrawal at the end of the calendar year in November of 2004. He received his 2nd withdrawal in January of 2005, 3rd in January of 2006, 4th in January of 2007, and will receive the 5th in January of 2008.
Can he consider the 72T arrangement satisfied in January of 2008? He will be 60 by then and wants to start taking regular withdrawals from his IRA without tax penalty at that time. Or must he wait until November of 2009 which would be 5 calendar years from when he received the first payment?
His investment company first said he could consider the 5th payment the end of the 72T. Then they came back and said that "technically" he had to wait until November of 2009. Then they came back and said that other people have terminated the 72T at the end of the 5 year period and IRS hasn't had a problem with it.
He's trying to be cautious because it could cost him over $10,000 if he makes a mistake. I tried to research the tax code for him but that was a bust.
Any help would be greatly appreciated.