QCDs .. When to Exclude from Income
Custodian issued the original check for a 2023 QCD on 12/05/2023. The check was lost in the mail but the taxpayer did not notify the custodian til 01/2024. A stop pay was issued for the original check and the custodian reissued the check on 01/12/2024. Upon receipt the taxpayer delivered the check to the charity. The amount of the QCD is included in the 2023 1099-R. Would the amount of the QCD be excluded in 2023?
Permalink Submitted by Alan - IRA critic on Thu, 2024-06-20 16:04
This illustrates the issues with late year distributions including QCDs. The charity must receive the donation by year end or if mailed and postmarked the postmark must be in the distribution year. If the 2023 1099R included the lost distribution, it can be counted toward the RMD if there is an RMD, but it cannot be claimed as a QCD and that will increase 2023 taxable income. Further, this is not a 2024 QCD either and can only be claimed as a 2024 itemized deduction on Sch A if the taxpayer can itemize.
If taxpayer cannot itemize, from at least a tax standpoint it would have been better to have the check reissued as a non QCD distribution to the taxpayer. Taxpayer could then have requested a new QCD check in January for the 2024 tax year.
If taxpayer had IRA check writing and the charity or US mail lost the check, the fallout would be even worse, because the distribution would not be reflected on the 1099R and any RMD would fall short.
Permalink Submitted by Shantelle Palermo on Fri, 2024-06-21 15:09
Thanks for confirming my conclusion of the situation. I was getting push back from the custodian on this.