QCD covering 2 RMDs

Submitted by DAVID STEWART on Mon, 2020-12-14 13:45

Hello, my client has 2 TIRAs, but wants to do a QCD in 2021 from the larger account since the RMD is greater. Client want to have the QCD equal or above the combined RMD. If the QCD is $25k and the combined RMDs are $25k, how would the reporting be done when filing taxes? Can the QCD be split and reported on both even though the QCD came from one?



Submitted by Alan - IRA critic on Mon, 2020-12-14 14:48

  • Since RMDs are subject to aggregation rules, it does not matter which account funds client’s RMD or their QCD. The net effect is the same other than which account balance is reduced relative to the other. However, given that the intended QCD total will be equal or greater to the total RMD, it is critical that the total QCDs (from whichever account) are fully completed before any other non QCD distribution takes place.  In other words, client should view their IRAs as if one combined account for RMD/QCD purposes.
  • The total distribution combining all  IRA1099R forms goes on line 4a of Form 1040, “QCD” is entered on the line next to 4b, and any balance which would be taxable goes on line 4b. There is no mention of RMDs, as is also the case without a QCD. 
  • The QCD can be split between accounts, but QCDs must be completed before any non QCD distributions are taken in the event client changes their mind about having all distributions go as QCDs.

Submitted by DAVID STEWART on Tue, 2020-12-15 02:37

Thanks for the great response.  So if my client has distributions planned for Jan 4 2021 from both IRAs, does that create a problem for the distribution from the smaller IRA?  If so, would a solution be to make the QCD at least $1 less than the combined RMD? 

Submitted by Alan - IRA critic on Tue, 2020-12-15 02:56

As long as all distributions are to be QCDs, the timing does not matter. There are only timing issues if a non QCD distribution is planned. Note that QCDs up to the combined RMD amount will save taxes on the RMD. QCDs taken in excess of the RMD will not reduce current year taxes, but will reduce future RMDs since the balance of the IRA will be reduced. Again, treat all IRA accounts as a single combined IRA.

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