1099 forms for Charitable donations from RMDs
After several years of hearing that one can reduce taxes on RMD withdrawals by making ‘qualified charitable distributions,’ I did so with 1 of my 2019 RMDs. My investment agent contacted the company, in this case American General Life, to put in the needed wording on their forms. AGL then sent the requested donation to me saying that I was to then mail it to the non-profit. Done. When their 1099-R form came, there was no indication anywhere that a non-profit donation had been made. The Gross distribution & Taxable amount were the same with taxes taken out as though no non-profit donation had been made. My tax preparer phoned AGL. They repeatedly & firmly stated that they were not ‘required’ to indicate the deducted amount on the 1099-R form. Fortunately, my tax preparer knew how to show that legal contribution which eventually did reduce the tax amount due on that specific RMD.
However, how can this ‘each company can do what they want’ format exist? I told the AGL person that I was going to contact AARP in hopes that they could generate some uniformity to have the promoted & allowed deducted/charitable monies noted on 1099-Rs. AARP subsequently referred me to Ed Slott, which is how I found you. Thank you for your expertise or guidance if further action is needed of me.
Permalink Submitted by tomd37 on Tue, 2020-04-21 16:55
To the best of my knowledge the procedure used by your investment company to make a QCD from a traditional IRA on behalf of someone over the age of 70.5 at the time of distribution is common practice among many investment firms. I have been taking QCDs for ten years now and as a matter of fact I am expecting receipt of my QCD checks in the mail later this week. I made my QCD withdrawls from my traditional IRA at Vanguard online last Friday. When those checks payable to the charitable organizations are received I will make a copy of them and then foward them on to the charities under a cover letter. When I entered the QCD request into Vanguard’s system I requested that no tax be withheld. Next February I will receive a 1099-R indicating in boxes 1 and 2 the gross distribution and taxable amounts respectively. At that point in time Vanguard does not know whether or not the payee is a qualified charitable organization or not so they cannot differentiate the amounts in boxes 1 and 2. It is up to me, when filing my form 1040, to indicate on lines 4a and 4b the total distribution and the total taxable distribution. When doing that in an online tax program there is somewhere to indicate that a portion of the distribution was for a QCD and that will place an indicator to the IRS somewhere on your 1040 that a QCD has been made explaining the monetary difference between 4a and 4b.
Permalink Submitted by Alan - IRA critic on Tue, 2020-04-21 17:05