Multiple IRAs QCD RMD rolled over

Submitted by Jane Early on Thu, 2024-01-25 15:35

I have four IRAs. RMD 1 = $4800; RMD 2 = $6700; RMD 3 = 8500, RMD 4 = $2300. All dollar amounts are approximate.

In January 2023, I did QCD of $5000 from IRA 1 to church. In May, I received a check from IRA 3 of approximately $200,000. I took the check to the bank and rolled over entire distribution to IRA 5. This was not a trustee to trustee transfer. 1099R is coded 7. Paperwork indicates rollover.

In December, I took an amount from IRA 1 of $20,000, satisfying my 2023 RMDs for all accounts when I factor in the QCD.

Now I’m being told that I made an excess contribution to IRA 5 of the $8,500 RMD and my taxable amount for 2023 is $28,500. Also I need to do a corrective distribution before 4/15 to avoid a penalty.

I thought I could take my RMDs from one account to satisfy all RMDs. If the above is indeed true, can the extra $200 from the QCD be used to lower the excess to $8,300 instead of $8,500? Is the distribution in May affected at all by the other RMDs for IRA 2 and 4?

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Permalink Submitted by Alan - IRA critic on Thu, 2024-01-25 16:50

The first 22,300 (your RMD total) distributed must be applied to your RMD and is not eligible for rollover. The QCD for 5000 applied to your RMD leaving 17,300. The 200,000 distribution completed your RMD, but 17,300 as the RMD portion was not eligible for rollover and created a 17,300 excess contribution to your IRA, which must be removed as an excess contribution. Since your RMD was actually completed with the 200,000 distribution, there was no need to take the 20,000 distribution in December. And you cannot roll the Dec 20,000 back to an IRA because you already used up your one allowed 60 day rollover in May.
It is simpler to look at your IRAs as one combined account with an RMD of 22,300. The first 22,300 you distribute, regardless of which accounts you use, is applied to your RMD. Therefore, your RMD was completely satisfied in May, but 17,300 of the 200,000 was the remaining RMD and not eligible for rollover. Therefore, you need to advise the custodian of IRA 5 that you rolled over 17,300 of RMD money and they must treat that amount as a regular excess 2023 IRA contribution. I assume you are retired and have no earned income. The end result is that you will have distributed 20,000 more than your RMD. This could all have been avoided if you had directly transferred the 200,000 to IRA 5 instead of receiving a distribution and the 1099R that reports that distribution.
Whoever indicated that only 8,500 was an excess contribution is incorrect, and that person also fails to understand that a distribution taken from any IRA account must be applied to the total RMD for all accounts.
When you do QCDs, you should complete all QCDs before your total RMD is completed. You did this part fine and you can claim the QCD on your return. Taking the 200,000 distribution was also OK if you had kept 17,300 of it (the remaining RMD at that time), and only rolled over 182,700 to IRA 5, as that would also have avoided an excess contribution because you would not have rolled over the 17,300 which was your remaining RMD.
Bank staff rarely understand these rules, and if you have more than one IRA account, they also do not know what distributions you took from the other accounts. Perhaps you should combine these IRAs by direct transfers and only maintain one IRA account in the future to avoid future mishaps. You can do as many transfers as you wish, they are not reported on your return, and they do not affect RMDs.
If you need further help in how to report this on your 2023 return, please advise.

Permalink Submitted by Jane Early on Thu, 2024-01-25 18:50

So is my taxable amount for 2023 the $17,300 plus the $20,000 for a total of $37,300.00?The return of the excess contribution would only add amounts to earnings for tax as it looks like I’ll be paying tax on the $17,300 plus the other distribution of $20,000 any way?

Permalink Submitted by Alan - IRA critic on Thu, 2024-01-25 19:37

Correct. Total taxable income for 2023 will be your RMD reduced by the QCD (22,300 less 5000) plus 20,000 plus any earnings generated on the 17,300 excess before you have it returned. Since the excess contribution was made in May, several months have passed but the gains depend on how you had IRA 5 invested. SInce any gains will be taxable in 2023 you need to have the excess returned before you file your 2023 returned. Assuming a gain of 1000, your total taxable income for 2023 would be 38,300.

Permalink Submitted by Jane Early on Sun, 2024-07-14 17:05

I was revisiting this, and when I did a search, I found another post dated 8/10/2023 originally submitted by “Mhotchkiss” titled “Multiple IRA and RMDs.”

The response seems to contradict the answer here as that person had another account in a brokerage also. Is it because in that scenario the person was converting to a Roth? Just confused since facts involve multiple IRAs in both scenarios.

Permalink Submitted by Jane Early on Thu, 2024-01-25 21:10

Ouch. I was going to try to prove the other person wrong. I did, but to my detriment. I have more taxable income than I thought I had. Thank you.

Permalink Submitted by Jane Early on Sun, 2024-07-14 17:16

Was trying to bump this. See Reply July 14 2024.