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In 1998, I cashed out my SEP from a prior employer to purchase my first home (condo). Does the waiving of the 10% penalty apply to SEP Plans? Is SEP and IRA synonymous? Or is a SEP an employer-sponsored retirement plan, thus not eligible for the waiving of the penalty? The amount I cashed out was 1,500.00 (closed SEP account).

Thank you for your help.
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In 1998, I cashed out my SEP from a prior employer to purchase my first home (condo). Does the waiving of the 10% penalty apply to SEP Plans? Is SEP and IRA synonymous? Or is a SEP an employer-sponsored retirement plan, thus not eligible for the waiving of the penalty? The amount I cashed out was 1,500.00 (closed SEP account).

****The same rules that apply to the distributions from regular IRAs apply to SEPs. Report the transaction on Form 5329 and mark off the exclusion that applies. In your case that would be exception 09.

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[[In 1998, I cashed out my SEP from a prior employer to purchase my first home
(condo). Does the waiving of the 10% penalty apply to SEP Plans?]]

Technically, no. Only to IRA accounts. The best thing that you could have done (assuming that you met all of the other qualifications for the penalty elimination) would have been to move your SEP to a rollover IRA.

[[ Is SEP and
IRA synonymous?]]

Nope...they are similar, but different. Like a duck and a goose.

[[ Or is a SEP an employer-sponsored retirement plan, thus not
eligible for the waiving of the penalty?]]

Basically correct. I would want to see more of the paperwork and how things were done. You MAY be able to make a case for the penalty waiver, but you'll have a bit of an uphill climb.

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[[****The same rules that apply to the distributions from regular IRAs apply to
SEPs. Report the transaction on Form 5329 and mark off the exclusion that
applies. In your case that would be exception 09.]]

Really? I would LOVE to have a code citation on this statement. It would seem reasonable that this would be the case, but I can't find anything that would allow me to make this statement. As you know, and IRA and a SEP, while similar, are not the same. And the law specifically allows the waiver for an IRA, but is silent on a SEP.

So any additional information that you can provide to me on this issue would be GREATLY appreciated.

TMF Taxes
Roy
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[[****The same rules that apply to the distributions from regular IRAs apply to
SEPs. Report the transaction on Form 5329 and mark off the exclusion that
applies. In your case that would be exception 09.]]

Really? I would LOVE to have a code citation on this statement. It would seem reasonable that this would be the case, but I can't find anything that would allow me to make this statement. As you know, and IRA and a SEP, while similar, are not the same. And the law specifically allows the waiver for an IRA, but is silent on a SEP.

So any additional information that you can provide to me on this issue would be GREATLY appreciated.
>>
***Roy, I'll try!!=:)

Publication 560:
Distributions (Withdrawals)
As an employer, you cannot prohibit distributions from a SEP-IRA. Also, you cannot
condition your contributions on any part of them being kept in the account.
Distributions are subject to IRA rules. For information about IRA rules, including the tax
treatment of distributions, rollovers, required distributions, and income tax withholding.
Publication 590.
Distributions (Withdrawals)
An employer cannot prohibit withdrawals from a SEP-IRA. Also, an employer cannot condition contributions to a SEP-IRA on the keeping of any part of them
in the account.
Publication 590
Distributions (withdrawals) from a SEP-IRA are subject to IRA rules. For information on these rules, including tax treatment of distributions, tax-free rollovers, required distributions, and income tax withholding, see chapter 5, When Can I. Withdraw and Use Assets From an IRA?
Publication 560
Additional taxes may apply to a SEP-IRA because of premature distributions, excess accumulations, or excess contributions. For information about these taxes, see chapter 6, What Acts Result in Penalties? in Publication 590.

****This is extracted from the code:

72(t) 10-percent additional tax on early distributions from qualified retirement plans
(1) Imposition of additional tax
If any taxpayer receives any amount from a qualified retirement plan (as defined in section 4974(c)), the taxpayer's tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includable in gross income.
(2) Subsection not to apply to certain distributions
Except as provided in paragraphs (3) and (4), paragraph (1) shall not apply to any of the following distributions:
(A) In general
Distributions which are--
I've snipped those that do not apply to this discussion:

(F) DISTRIBUTIONS FROM CERTAIN PLANS FOR FIRST HOME PURCHASES-Distributions to an individual from an individual retirement plan which are qualified first-time homebuyer distributions (as defined in paragraph (8)). Distributions shall not be taken into account under the preceding sentence if such distributions are described in subparagraph (A), (C), (D), or (E) or to the extent paragraph (1) does not apply to such distributions by reason of subparagraph (B).

Amendments:
Section 303(a) of the Taxpayer Relief Act of 1997 amends Paragraph (2) of section 72(t) (relating to exceptions to 10-percent additional tax on early distributions from qualified retirement plans), as amended by section 203, by adding at the end the following new subparagraph:
(F) DISTRIBUTIONS FROM CERTAIN PLANS FOR FIRST HOME PURCHASES- Distributions to an individual from an individual retirement plan which are qualified first-time homebuyer distributions (as defined in paragraph (8)). Distributions shall not be taken into account under the preceding sentence if such distributions are described in subparagraph (A), (C), (D), or (E) or to the extent paragraph (1) does not apply to such distributions by reason of subparagraph (B).

Roy, I've gone through the code & publications (over & over). Perhaps I am misinterpreting what I read. I just can't find any specific wording that disqualifies the SEP from the provisions that relieve penalty for first time homebuyers.

"Jack"
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