qcd

Submitted by Maria Difalco on Sat, 2016-01-02 15:22

Happy New Year Alan:

PATH law- is it clearly stated that contribution must be made directly to charity from IRA custodian? In the past checks have been sent to me and I have forwarded them to charity.

12/24/20!5 response to greggguiol and dmx ‘client should have waited’ response–I am confused. Does this mean that RMD’s also need an 8606 to be completed?

12/30/2015 response to dickf654 about notice 2007-7. What would be the best site to read this? Also what site would you recommend to actually read PATH legislation?

Thanks so much,

brndflc



Submitted by Alan - IRA critic on Sat, 2016-01-02 23:35

  • Happy New Year!  The PATH law did not change any QCD provisions other than to make it permanent.
  • The usual method of transmitting the QCD is a check payable to the charity but mailed to the taxpayer for delivery. But a taxpayer with check writing for their IRA can also make out their own check to the charity on their IRA and it will qualify as a QCD. This is addressed in Q 41 in Notice 2007-7 here:  https://www.irs.gov/pub/irs-drop/n-07-07.pdf.  Scroll down to Sec 1201 for QCD Q and As.
  • An 8606 is only needed to report non QCD distributions if there is basis in the IRA. This taxpayer took their RMD prior to the QCD which had nothing to do with Form 8606, but it resulted in the RMD being completed before the QCD distribution. Therefore, the QCD could not be applied to the RMD in that case.
  • Have not yet found a good source of the PATH legislation which was rolled into the Consolidated Budget Act.

Submitted by Maria Difalco on Sun, 2016-01-03 20:48

Alan:  Thanks.  I tried the ‘2007’ site several times.  Each response was page not available.  I tried a few other wordfings for search but nothing came up about   qcd.   Any ideas? brndflc

Submitted by Alan - IRA critic on Sun, 2016-01-03 23:27

Try this and click on the Notice 2007-7 at the end of the page:  https://www.irs.gov/uac/IRS,-Treasury-Issue-Guidance-on-New-Distribution-Provisions-of-the-Pension-Protection-ActI have the Notice in my favorites and it opens every time, perhaps because I put it there several years ago.

Submitted by David Mertz on Mon, 2016-01-04 01:57

The problem with the first link is that the period at the end is being included as part of the URL.  Here is the link again, without the offending period:  https://www.irs.gov/pub/irs-drop/n-07-07.pdf

Submitted by Maria Difalco on Wed, 2016-01-06 19:07

Alan:  removal of period helps.  Pages 15 and 16, questions #42 , 43 and 44 confuse me.  Do the responses mean that if I have a $5 K RMD and want to use only $2K for a qcd, then the IRS will not accept as qcd and I must claim this as payment to me on 1040?   this negates qcd?      I thought that the total amount of $5K would be on line 15a and the qcd $2K would be on line 15b as not included in taxable income.    Please clarify.Thanksbrndflc

Submitted by Alan - IRA critic on Wed, 2016-01-06 21:47

No. The amount of your QCD is not limited other than the 100k max. The QCD can be more or less than your RMD. If your QCD of 2k is done at the same time or earlier than the distribution of 3k to yourself, then only 3k would be included in your income and 2k would not. 5k would go on 15a and 3k on 15b with “QCD” entered on the line next to 15b. The QCD portion of 2k is not taxable. Another question addresses a distribution processed as a QCD which turns out not to be a QCD because it went to an ineligible charity like a donor advised fund. In that case, the amount sent directly to the charity would not be a valid QCD and would therefore be included in your income. In that situation you would show 5k on 15a and also on 15b as fully taxable. Since the full distribution is included in your income, you could itemize the charitable deduction if you otherwise qualified to itemize.

Submitted by Maria Difalco on Fri, 2016-01-08 14:43

Thanks.B 

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