QCD and 60 day rollover
Hello! Hoping for some feedback and thoughts on the following scenario:
Client is 72 (turning 73 in 2022) and wants to do a 60 day rollover of $10,000. The RMD is $8,000 for 2022. The client would like to do a QCD for their RMD. I know the RMD cannot be rolled back in as part of the 60 day rollover, so would we avoid this issue if we process the $8,000 QCD FIRST, which will satisfy the RMD, and then process a $10k distribution, which the client intends on rolling back in within 60 days? Or is our only option to do one $10,000 distribution, of which only $2k can be rolled back in as a 60 day rollover? I want to avoid the issue with sending out multiple distributions and having that first distribution count towards the RMD, as well as a distribution to the client that is eligible to be rolled back in. My guess is that since the QCD is directly to a charity, we would avoid the issue since it won’t be a distribution directly to the client.
Thanks!
Permalink Submitted by Alan - IRA critic on Tue, 2022-01-25 21:25
Yes, complete the QCD first. If it covers the full RMD, the client can then take a distribution that is fully eligible for a 60 day rollover. But keep in mind the one rollover limit for a 12 month period. If client has rolled over another distribution taken in the last 12 month, a distribution taken within 12 months will not be rollover eligible, and if client is eligible, then they will be locked out of another such rollover for the next 12 months. The IRS changed their rollover approach because taxpayers were using their IRA for temporary loans, and could well be the case with this client as well.