IRA RMD to Charity
A client with IRA money held at another b/d filled out an IRA distribution request. She checked off normal distribution (over 59 1/2) (she is 71) and indicated that the check be sent to a charity. The form is thru National Financial Services (NFS). The 1099 reported to her the total distribution as taxable income. She wanted to take this RMD and have it sent directly to the charity. Upon further review I am seeing that NFS did not know it was a RMD (she checked off ‘normal distribution’ – maybe there is a different form) and NFS had no idea that the alternate payee is a charity. Seems as if the other ‘broker’ did not handle this properly (?). Any ideas? Is there a way to correct this for her (or do I use it as leverage to gain management of this account?).
Thank you.
Permalink Submitted by Alan Spross on Wed, 2011-04-13 19:54
There is no problem here as long as she delivered the check made out to the charity. The 1099R has no special instructions for custodians, probably because the IRS has viewed this provision as temporary. It is up to the taxpayer to correctly report the QCD on line 15 of Form 1040. It is handled much like a rollover, with “QCD” entered next to line 15b, and nothing on 15b indicating the distribution as non taxable. As long as no distribution was taken before the check for the charity, the QCD is applied against the RMD requirement. The RMD would be satisfied if the QCD is at least as much as the RMD and nothing would be taxable.
See p 22 of the 1040 Instructions. Note that a January 2011 QCD can be applied to either 2010 or 2011.