Qcd stop payment and redeposit affecting irs tax rmd reporting

Submitted by Bev Henderson on Mon, 2022-10-24 17:28

I made a qcd from my IRA to a charity as part of my rmd. The check was payable to the charity, and no taxes were withheld, being a qcd. The check was lost in the mail so a stop payment was placed on it and the money was redeposited into my IRA. I later moved my accounts to a different financial firm, but the original financial firm indicated on my final statement with them that money ($300) that was redeposited, as still being included in my total rmd distribution for the year.

For clarification, with this original firm I had also made an rmd in kind transfer, and additional qcd’s to total my required rmd for the year, had the $300 not been redeposited. So this redeposited $300 was still included in their total rmd distribution on the statement, which should have been $300 less. With the new financial firm I made the $300 qcd to the charity again, which was received by them, now fulfilling my total rmd requirement for the year.

The question is how do I report this on my taxes, since the original firm won’t just change the total of the rmd from their firm. They want me to sign a statement that I want it to be coded as a 60 day rollover, but I understand in a 60 day rollover the check has to be payable to me (it was payable to the charity), and had taxes withheld (which it didn’t because it was a qcd ). I am 73 years old.

Thank you for any help you can give me!



Submitted by Alan - IRA critic on Mon, 2022-10-24 18:14

  • All the IRS cares about is that the 1099R forms for all IRA custodians add up to your RMD. The original firm’s 1099R ( is all this for 2022?) should not include the amount of the stopped payment, since that $300 should now be treated as not distributed and therefore not credited to the RMD. Where is this $300 now, was it transferred to the new custodian. 
  • The first custodian should not be showing any amount as a rollover. You may not even have a rollover available under the one rollover rule, and a stop payment does not constitute a distribution and rollover.  You also do not wish to use up your one allowed rollover on a transaction that should not be treated as a rollover in the first place.  Withholding is immaterial because you are allowed to elect any amount of withholding you wish or decline it altogether. A QCD is just a distribution for which withholding does not apply.
  • To preempt any 2022 tax reporting problems, you need to find out what the first firm will show on their 1099R form issued in January. It should NOT include that $300 on which payment was stopped. 
  • I assume that all funds moved to the new custodian were by direct trustee transfers, which are not treated as distributions nor are they reported on a 1099R.
  • If the custodian’s statements are wrong, it does not matter as long as their 1099R forms are correct. It appears that their statements are not set  up correctly to reflect distributions on which a stop payment is processed.

Submitted by Bev Henderson on Tue, 2022-10-25 02:48

Thank you for your response.  Yes this is all for 2022 and the ira to the new custodian was by direct trustee transfer.  The $300 qcd that a stop payment  was put on and redoposited at the original custodian, was part of the total ira transferred to the new custodian.    At the new custodian, the qcd for $300 was made to the charity again that had not received the first check. The original custodian  will show on the 1099r the amount which includes the $ 300 stop payment,  thus overstating my rmd from them by $300. Since a rollover would not be correct, as I suspected, would it be better to just let the $300 ride as a distribution (and pay the $45 extra in income tax) from the original firm or code the qcd in the 1040 as including the $300 that was stop paid and redeposited with their firm.  Otherwise, what is my option if the original company won’t  somehow correct it other than by coding it a rollover?

Submitted by David Mertz on Tue, 2022-10-25 12:57

  • You mentioned that they want you to sign a statement that you want it coded as a 60-day rollover, so it seems that they are giving you some sort of choice, otherwise why would they need a signed statement.  You might instead sign a statement saying that you want the withdrawal and redeposit coded each as a trustee-to-trustee transfer, which it effectively is. That would make both the movement of the $300 out of the IRA and the $300 back into the IRA nonreportable.
  • It can’t be treated as a distribution and rollover because as a distribution it would constitute part of your 2022 RMD (the first-funds-out rule) and an RMD is ineligible for rollover.  However, without an audit the IRS would not know that treating it as a rollover was impermissible because Forms 1099-R do not reflect the timing of distributions.
  • The only option if they report it as a distribution and as a rollover contribution would seem to be to file a substitute Form 1099-R (Form 4852) to show that $300 less than the amount shown on the original custodian’s Form 1099-R was actually distributed and provide explanation that the $300 should have been treated as a nonreportable transfer because the funds never became available for your use.  Filing the substitute form might require paper filing, which is generally undesirable.

Submitted by Bev Henderson on Wed, 2022-10-26 18:12

Thank you for your help. I will check out your suggestion on having them code it as a trustee to trustee transfer.  I don’t understand the mechanics of it, of course – would that just be an entry they make on the 1099 or some separate document they provide  for the irs? It is of interest they are keeping their hands clean of any legal repercussions in that they have not written anywhere that  the rollover is their idea.  They simply sent a statement to me on plain paper (addressed to them) with a “sign here” sticker, stating “please  accept this letter as your authorization  to code it as a 60 day rollover”, for me to sign. As if I wrote this to them of my own decision to treat it as such, and they had not made that decision for me.On my question of just including the $300 on my 1040 as part of the total qcd, since they are including it in the total distribution:  wouldn’t  this negate the error, and the end result be correct?Thank you, all who respond.

Submitted by David Mertz on Wed, 2022-10-26 21:24

  • A trustee-to-trustee transfer is not reportable to the IRS, so the $300 would not be included anywhere on the Form 1099-R that reports the actual distributions from the original IRA.  Making it a trustee-to-trustee transfer requires that the custodian make an adjustment to the coding of the $300 withdrawal that was originally coded as a distribution.  They would also need to code the deposit as a trustee-to-trustee transfer rather than a rollover contribution, eliminating any reporting of this deposit on Form 5498.
  • By reporting the $300 as a QCD your tax return would show the correct amount of taxable income, but the $300 doesn’t legally qualify as a QCD since it was never received by the charity.

Submitted by Alan - IRA critic on Wed, 2022-10-26 23:58

If they stopped payment and all this activity was contained in 2022 before any 1099R forms are prepared, I don’t know why the custodian would even report the 300 as a distribution on the 1099R. And if they do not recode as a transfer out and back, which would accomplish the same thing by eliminating the 300 from the 1099R, you are left with their flawed rollover suggestion. Further, since the 300 that they distributed as the initial QCD was part of your RMD, it was not eligible to be rolled back and they should know that.

Submitted by David Mertz on Thu, 2022-10-27 00:36

It does seem like they should be able to treat this as a bookkeeping correction by changing the original $300 withdrawal record to show a $0 withdrawal instead.  That would be the simplest all around, but I get the impression that they are reluctant to do that for some reason, otherwise they would have just done that already.  Maybe for internal accounting purposes they want to retain some record of the $300 having been removed from the account temporarily.

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