Substantially Equal Periodic Payments from an IRA.

• Under the substantially equal periodic payment exception, the account owner must withdraw a substantially equal amount from an IRA annually for five years or until the taxpayer reaches age 59 1/2. The amount that must be withdrawn is based on the taxpayer's life expectancy. • Three safe-harbor methods are available for calculating the annual withdrawal amount: (1) the required minimum distribution method, (2) the fixed amortization method, and (3) the fixed annuitization method. Each method produces a different annual withdrawal amount. • The IRS has been willing to approve taxpayers' requests to use reasonable variations on the safe-harbor methods to calculate their annual withdrawal amounts. • Modification or termination of the SEPP before the end of the required time period results in a retroactive application of the 10% penalty to all previous withdrawals and interest charges from the date each withdrawal was received until the modification or termination occurred. [ABSTRACT FROM PUBLISHER]