Rolling 401k to IRA during RMD age 70 1/2 year
Client turns age 70 1/2 in 2018 (DOB 5/4/18). He has 401k that has not been rolled into IRA yet. That is the plan. He wants to contribute the whole 2018 RMD to charity from the IRA. Is there any way around not having the rollover withhold the RMD first (and therefore subject to tax). In other words, is he too late to do the QCD from the IRA for 2018 tax year?
Permalink Submitted by Alan - IRA critic on Fri, 2018-05-25 20:58
Too late, he should have done the IRA rollover in 2017, as there would not have been a 401k RMD then. Any RMD rollover after 12/31/2017 will require the RMD to be distributed separately unless client is still working for the 401k sponsor and is not a 5% owner. If this was just a matter of avoiding taxable income in 2018, client could delay the RMD rollover until January and have no taxable income in 2018, but would then have to take 2 RMDs in 2019 when the rollover was done, and would still not be able to to a QCD until 2020. I assume client has no IRA balance at this time.
Permalink Submitted by Kent Zahner on Tue, 2018-05-29 13:10
That is what I was afraid of. So, if he does the rollover to the IRA in 2018 (now), takes the 2018 RMD (now) as fully taxable, then he should be ok to do the QCD in 2019 and forward from the new rollover IRA?Thank you …
Permalink Submitted by Alan - IRA critic on Tue, 2018-05-29 16:18
Yes, QCDs can start in 2019 from the IRA, or in 2018 after the IRA rollover but for this year that would only reduce taxable IRA RMDs if there was an IRA balance on 12/31/2017.