2018 QCD from an IRA RMD for taxpayer over 70 1/2

Technical topics regarding tax preparation.
#1
philly  
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I am doing several tax projections for taxpayers that are senior citizens subject to IRA RMD. Most older clients will be taking the standard deduction. What I am thinking is instead of making direct charitable contributions in December the taxpayers should make their charitable contributions through a Qualified Contribution Distribution.
Will doing a QCD from an IRA RMD reduce taxable income and still allow the taxpayer to take the standard deduction ?
 

#2
Nilodop  
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If by "reduce" you mean "not increase" or "reduce as compared to taking the distribution and making the contribution personally", yes.
 

#3
lucyko  
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I think this is an excellent strategy. Qualified Charitable Contributions will reduce both your AGI as well as taxable income . Be sure your client is over age 70 1/2 and the distribution comes direct from the IRA custodian to the designated charity.

In my opinion this has many more advantages contrasted to donating appreciated stocks to a charity .
 

#4
Jake  
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A taxpayer just got a notice from IRA that he owed $10,000 in additional taxes and penalty for TYE 12-31-16 because they ignored his claimed QCD's.
 

#5
lucyko  
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I think there's got to be more to this story than IRS ignored his claimed QCD's :

Maybe the taxpayer was not age 70 1/2 ?
Maybe the distribution was not made direct to the charity ?
Maybe the distribution was not made timely ?
Maybe the transaction was not handled correctly on the tax return ?
 

#6
sjrcpa  
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Jake - several of my clients got those notices. I wrote back with proof of the contributions from the IRA and mentioned how QCD properly appeared on the 1040. Some of my clients got the notice for more than one year. I think it is a procesxsing issue at the IRS.
 

#7
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IRS seemed confused by QCDs in some past years, even when reported exactly as required.

For someone taking the standard deduction a QCD should save tax, especially if it affects how much Social Security is taxable. It's essentially an above the line deduction for charitable contributions.
 

#8
Skatter  
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sjrcpa wrote:Jake - several of my clients got those notices. I wrote back with proof of the contributions from the IRA and mentioned how QCD properly appeared on the 1040. Some of my clients got the notice for more than one year. I think it is a procesxsing issue at the IRS.


One or two clients per year get these notices related to their properly claimed (and flagged) QCD. In all cases so far a phone call to Andover (the office from which the notice came) straightened it out without any difficulty. I've gotten the impression they are familiar with this glitch.
 


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