QCD from SEP IRA, then later needs to make a contribution

Submitted by Jeanette LoPiccolo on Thu, 2019-05-30 20:20

A client turned 70.5 and began making QCDs from his SEP IRA. Afterwards, he realized that he would like to make a SEP contribution for 2018 by Sept 15, 2019. If he makes the contribution later this year, he will make his SEP ineligible for the QCDs (already completed). If the client establishes a new SEP IRA account and makes the 2018 contribution to that account rather than his old SEP account, would this resolve the QCD eligibility issue?



Submitted by Alan - IRA critic on Thu, 2019-05-30 22:48

  • At the time of the QCD, this SEP IRA is clearly on  going. The employer will make the SEP Contribution for the year, only to a new SEP IRA instead of the on going SEP in existence when the QCD was made. The key is that the employer WILL make a SEP contribution for the year, rather than which IRA receives that contribution, so I doubt that the IRS would consider this an acceptable strategy to attempt to qualify the QCD.
  • Copied from Notice 2007-7 Q 36: 

    Q-36. Is the exclusion for qualified charitable distributions available for distributions from any type of IRA? A-36. Generally, the exclusion for qualified charitable distributions is available for distributions from any type of IRA (including a Roth IRA described in § 408A and a deemed IRA described in § 408(q)) that is neither an ongoing SEP IRA described in § 408(k) nor an ongoing SIMPLE IRA described in § 408(p). For this purpose, a SEP IRA or a SIMPLE IRA is treated as ongoing if it is maintained under an employer arrangement under which an employer contribution is made for the plan year ending with or within the IRA owner’s taxable year in which the charitable contributions would be made.

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