If an individual modifies a substantially equal periodic payment (SEPP), including discontinuing the SEPP before the end of the applicable SEPP period or increasing or decreasing the required amount in a manner that is not allowed under the regulations, all of the 10% penalty (additional tax) waived under Rule 72(t) becomes due. According to IRC 72(t)(4), interest also applies to these amounts. Payments that occur after the SEPP has been modified will be treated as regular distributions subject to the 10% additional tax, unless an exception applies.
Several exceptions to the modification rules apply, however. For instance, an individual may reduce his or her SEPP amount by making a one-time switch from the amortization or annuitization method to the required minimum distribution (RMD) method. Individuals should check with their tax professional to determine whether a modification has occurred.
For further reading, see Rules Regarding Substantially Equal Periodic Payment, Taking Penalty-Free Withdrawals From Your IRA and Avoiding IRS Penalties On Your IRA Assets.
This question was answered by Denise Appleby