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This tax worksheet calculates the distribution required to meet the substantially equal periodic payment exception to the penalty on early withdrawals (distributions made before age 59 1/2) from an IRA or from a qualified retirement plan if the employee has separated from service.

This worksheet computes the required withdrawal under all 3 methods:

• Required Minimum Distribution
• Fixed Amortization
• Fixed Annuitization

The taxpayer can then compare the withdrawal amounts to determine which method is preferred. Once chosen, the same method generally must be used in all subsequent years until the taxpayer reaches age 59 ½ or the 5 years, whichever is longer. However, after withdrawals have begun, taxpayers may make a one-time change to the Required Minimum Distribution Method.

Footnotes

1. The interest rate must be less than or equal to 120% of the federal mid-term rate of either of the two months immediately preceding the first withdrawal.
2. The Required Minimum Distribution method results in the lowest monthly distribution. It is computed by dividing the taxpayer’s balance at December 31 of the preceding year by his or her life expectancy (either single or joint). It is recomputed every year.
3. The Fixed Amortization Method amortizes the taxpayer’s account balance over the taxpayer’s life expectancy using either the single life expectancy table, the uniform life expectancy table, or the joint life expectancy table using the oldest named beneficiary. The annual distribution amount will remain constant.
4. The Fixed Annuitization Method uses the non-gender based mortality tables in Revenue Ruling 2002-62 to derive an annuity factor which is used to compute the annual distribution. The annual distribution amount will remain constant.

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