QCD REPORTING ON 1099R

Submitted by Edward Harris on Thu, 2017-12-07 16:44

I have been told by my clients’ CPA’s that my broker/dealer, LPL Financial, is not preparing the 1099R properly when a client over 70 1/2 takes their RMD but donates a portion to a qualified charity. LPL has been putting the gross amount of the distribution in Box 1 of the 1099R and the same amount in Box 2 and then putting an “x” in the Box 2a which says taxable amount not determined. This is happening even though LPL is cutting the checks directly to and mailing to the charity. When the CPA gets the 1099R and is preparing the return, they have no way of knowing if or how much of the RMD is going to a qualified charity unless the client remembers to tell them.
I have been searching the IRS website for guidance on preparing the 1099R but can’t find anything specific to take back to LPL. When I speak to LPL, they say they are doing it correctly and it is up to the client to tell their tax preparer about the QCD. Is this correct?? Can anyone shed some light on this for me?



Submitted by Alan - IRA critic on Thu, 2017-12-07 17:45

  • LPL is correct because the IRS has not provided any special reporting requirements for 1099R issuers for QCDs. The 1099R will look exactly like it would have without a QCD. Perhaps there was no separate distribution code for QCDs because the QCD was temporary until last year. If the IRS wants to have better control of QCD reporting and prevent possible abuses, they should come up with a code and require a separate 1099R for QCDs under that code. In addition, under current tax proposals the QCD will become more popular because itemized deductions will be somewhat restricted and the standard deduction is proposed to rise.
  • Meanwhile it is fully up to the taxpayer to report the QCD on line 15 of Form 1040. This is done similar to reporting a rollover by entering QCD next to 15b and entering only the non QCD amount on 15b. And if the client has basis in the IRA that would be recovered on Form 8606, the QCD will be all pre tax and therefore should not be included on the 8606. Not sure what the CPA is thinking since the CPA has likely not seen any 1099Rs in the past reporting a QCD like he thinks it should be reported. I would think that his professional tax program would handle this correctly as long as the CPA enters the QCD amount into the program in addition to the 1099R itself.

Submitted by Ben Meyer on Fri, 2017-12-08 03:13

   

Add new comment

Log in or register to post comments