QCD confused

[cathy63]

Even if the custodian writes the check directly to the charity, the instructions for form 1099-R still tell them to put the entire distribution in box 2a and check the "taxable amount not determined" box. The only time they wouldn't check that box for an IRA is if the entire amount in box 1 is a direct rollover to a qualified plan or another tIRA.

This is because an IRA custodian has no way of knowing whether or not you have other IRA accounts and what you did with them. They can't just assume a gift to charity is a QCD even if they send the check themselves. You could give $105K from one IRA and $50K from another, but you can only exclude $105K from income, so there would be a problem if you had two 1099-Rs and they both had $0 in box 2a.

 

[SecondCor521]

Not to mention that it is the taxpayer's responsibility, not the custodian's, to ensure that the QCD recipient is a 501(c)(3) organization and that the taxpayer receives the proper acknowledgment letter and that no goods or services were received in exchange for the donation.

 

[misanman]

With Fidelity, I make a qcd request online and they issue the check. So they know and report it as such.

 

[OldShooter]

With Fidelity, I make a qcd request online and they issue the check. So they know and report it as such.

I think that expecting custodians to determine the tax deductibility of a payment is probably an impossible idea. A few big charities, maybe, but they can't know or research every entity they send checks to.

For example, is WLS-AM a 501(c)3? How about WCFL? (Answers are "No" and "Yes" -- I think)

 

[rk911]

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I think that expecting custodians to determine the tax deductibility of a payment is probably an impossible idea. A few big charities, maybe, but they can't know or research every entity they send checks to.

For example, is WLS-AM a 501(c)3? How about WCFL? (Answers are "No" and "Yes" -- I think)

Our custodian required the tax ID number for all of our QCDs.

 

[SecondCor521]

I think that expecting custodians to determine the tax deductibility of a payment is probably an impossible idea. A few big charities, maybe, but they can't know or research every entity they send checks to.

For example, is WLS-AM a 501(c)3? How about WCFL? (Answers are "No" and "Yes" -- I think)

I think it's definitely impossible. See posts #51 and #52 for several reasons why the custodian can't do it. Yes, in most cases they could, but definitely not in all cases. It's really up to the taxpayer (and their preparer) to make the proper determination.

 

[jebmke]

I think it's definitely impossible. See posts #51 and #52 for several reasons why the custodian can't do it. Yes, in most cases they could, but definitely not in all cases. It's really up to the taxpayer (and their preparer) to make the proper determination.

I'll add another reason. The taxpayer may have some basis in the IRA which needs to be pro-rated to the QCD.

and another reason, the taxpayer may be subject to the clawback rule if he made recent contributions to the IRA

 

[cathy63]

I think it's definitely impossible. See posts #51 and #52 for several reasons why the custodian can't do it. Yes, in most cases they could, but definitely not in all cases. It's really up to the taxpayer (and their preparer) to make the proper determination.

They can do some due diligence to make sure a recipient of a check they create is a 501c3. As rk911 pointed out, it's easy enough to look them up by ein or even by name and address. The IRS has a tool: https://apps.irs.gov/app/eos/

The only other thing the broker can do is to provide the account holder with a list of contributions that may be eligible to be treated as QCDs. They could put that on a year-end statement or a supplemental page with the 1099-R, but it can't be on the 1099-R itself if they're following the IRS directions (and I can't imagine a major brokerage is not complying with basic IRS requirements that haven't changed in years).

With Fidelity, I make a qcd request online and they issue the check. So they know and report it as such.

FYI - here's a TTax Q&A from a couple of years ago where the recipient describes the 1099-R he received from Fido. As expected, there is nothing on it that indicates a QCD. Qualified Charitable Distribution and 1099-R reporting in Boxes 1, 2a and 2b

 

[TheWizard]

I'll add another reason. The taxpayer may have some basis in the IRA which needs to be pro-rated to the QCD.

and another reason, the taxpayer may be subject to the clawback rule if he made recent contributions to the IRA

Never heard of a clawback rule.
Are you making this up?

 

[Gumby]

Never heard of a clawback rule.
Are you making this up?

Wouldn't a better second sentence be -- "Can you explain it to me?"

 

[TheWizard]

Wouldn't a better second sentence be -- "Can you explain it to me?"

Possibly.
There are clawback rules for Medicaid from what little I know about it.
But for QCDs, from a 100% pre-tax IRA?
Yes. Enlighten me...

 

[SecondCor521]

Possibly.
There are clawback rules for Medicaid from what little I know about it.
But for QCDs, from a 100% pre-tax IRA?
Yes. Enlighten me...

Not @jebmke, but I think they're referring to this:

"Offset of QCDs by amounts contributed after age701/2. Beginning in tax years after December 31, 2019,the amount of QCDs that you can exclude from income is reduced by the excess of the aggregate amount of IRA contributions you deducted for the taxable year and any prior year that you were age 701/2 or older over the amount of such IRA contributions that were used to reduce the excludable amount of QCDs in all earlier years."

From IRS Pub 590-B, page 14 at https://www.irs.gov/pub/irs-pdf/p590b.pdf. It's a bit of a corner case, but it's a perfect example of a reason why the custodian can't take on the responsibility.

 

[TheWizard]

Ok, but since I retired well before age 70.5, I think I'm in good shape.
But I can see how this would be an issue for folks who work longer...

 

[donheff]

I have considered making a donation to a 501(c)(3) organization but confused from the instructions by the company holding my tIRA account.
I was told by the rep that I provide the name of the 501(c)(3) organization and the amount I am requesting. They would then send me a check that I would personally deliver to the 501(c)(3) organization.

That part is fine. The check must be from the IRA to the organization. It doesn't matter whether you mail it or the company mails it. The mistake would be to take some or all of a distribution to you and then send that money to the charity indirectly (e.g. with a check from a taxable account or a CC payment). That would not be a QCD.

 

[Midpack]

How long does it take to get checks for an existing Vanguard TIRA? I’m eligible to start QCDs in Nov and I’ll want to make donations before year end. TIA