72(t) Software - Substantially Equal Periodic Payments

Financial advisors and tax professionals need a 72(t) calculator to assist the numerous individuals under age 59½ who are seeking access to their funds in qualified retirement plans without incurring the 10% early withdrawal tax penalty. These individuals might be facing situations like job loss due to downsizing, health issues, or a desire to retire before they feel they're 'too old'. A 72(t) calculator helps in navigating the complex rules surrounding early distributions, ensuring accurate and compliant financial planning for these clients.

2022 IRS Update

IRS Revenue Bulletin 2022-06: provides guidance on whether a series of payments from an individual account under a qualified retirement plan is considered a series of substantially equal periodic payments within the meaning of section 72(t)(2)(A)(iv) of the Internal Revenue Code . This notice also applies for purposes of determining whether distribution from a non-qualified annuity contract is part of a series of substantially equal periodic payments within the meaning of section 72(q)(2)(D) .

This notice, effective January 1, 2023, modifies and supersedes Rev. Rul. 2002-62, 2002-2 CB 710, and Notice 2004-15, 2004-1 CB 526.

(1) Determination of Substantially Equal Periodic Payments SECTION 1. PURPOSE. https://www.irs.gov/pub/irs-drop/n-22-06.pdf. (2) Federal Register: Prevailing Wage and Apprenticeship Initial Guidance .... https://www.federalregister.gov/documents/2022/11/30/2022-26108/prevailing-wage-and-apprenticeship-initial-guidance-under-section-45b6bii-and-other-substantially.

Advantages of Utilizing ImagiSOFT's 72(t) Calculator

• Empower your clients with a clear and precise report that facilitates comparisons of different 72(t) payment options based on the three IRS distribution methods: Required Minimum Distribution (RMD), Fixed Amortization, and Annuitization.
• Leverage life insurance strategies to transform taxable assets into tax-exempt ones, as demonstrated in the indexed annuity and life insurance examples. These illustrations show the conversion of $100,000 of pre-tax assets into an annual income of $4,147, which pays the premium on an indexed universal life policy that provides a $145,000 tax-free death benefit.
• Incorporate the fluctuating 120% Mid-Term AFR - Approved Federal Rate into your calculations for up-to-date and compliant financial planning.
• Guide your clients so they will avoid hefty IRS penalties and the costs associated with private letter rulings.

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