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#2223779 - 10/16/19 03:08 PM Early IRA Withdrawals, Exceptions
burkemi Offline
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The IRS lists several situations in which a customer may take a distribution from his/her IRA without incurring the early distribution penalty. I have attended IRA seminars and various scenarios are covered. My question concerns the disability exception. The presenter stated rather bluntly that we should not require proof (doctor's note, award letter, etc.) for a disability distribution. It was stated that banks have been dinged for requiring this information, since "we aren't doctors and aren't trained to determine what is/is not a qualifying disability." However, no specific examples were provided.

Is there any risk to requiring "documented proof" of disability before coding a distribution as such? I know in the lending world banks have gotten in trouble for requiring excess documentation - can the same be said here? Do any of you require the award letter or a doctor's note?

Any feedback would be greatly appreciated. If you know of any banks that have gotten in trouble for requiring it can you provide the info?
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#2223781 - 10/16/19 03:24 PM Re: Early IRA Withdrawals, Exceptions burkemi
John Burnett Offline
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This is a matter between the IRS and the taxpayer/customer. You are not responsible for the customer's actions in taking the early distribution.
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#2223784 - 10/16/19 03:29 PM Re: Early IRA Withdrawals, Exceptions burkemi
burkemi Offline
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That is my stance as well. Trying to come up with a convincing argument to stop requiring it is my issue.
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#2223791 - 10/16/19 03:42 PM Re: Early IRA Withdrawals, Exceptions burkemi
John Burnett Offline
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I think the bank may want to provide current information concerning early distributions -- with a disclaimer that the bank is offering accurate information to the best of its knowledge but the customer is responsible for complying with applicable laws and IRS regulations, and should consult a qualified tax adviser for further information.

And then tell its customer service people they aren't IRS cops and should not be asking customers for documentation of their meeting criteria for withdrawal (perhaps with an exception for proof of age for setting up RMDs).
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#2223824 - 10/16/19 06:37 PM Re: Early IRA Withdrawals, Exceptions burkemi
burkemi Offline
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Could there also be HIPAA considerations here?
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#2223835 - 10/16/19 07:46 PM Re: Early IRA Withdrawals, Exceptions burkemi
John Burnett Offline
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I don't think HIPPA is implicated if the customer him/herself provides the documentation. That said, any such documentation could have some pretty private information that a customer might not relish sharing with his/her bank. I reiterate my suggestion above that the bank doesn't need to get involved in documenting the disability.
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#2223849 - 10/16/19 08:52 PM Re: Early IRA Withdrawals, Exceptions burkemi
burkemi Offline
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Thank you, John. Truly appreciate your input.
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