Qualified Charitable Distribution for 2011
I’ve read through past posts on this subject, but need clarification:
1. “Must not take any distributions before your QCD if you want QCD to cover RMD.”
I turned 70 1/2 in 2009, and RMDs were waived for that year.
In 2010, I took my first RMD: a portion before 12/31/10 and the remainder before 4/1/11.
Also, in 2011, I took RMDs for an inherited IRA and 401k.
I still have to do an RMD from my other TIRAs for 2011.
Can I take a partial QCD from that RMD with the balance going to me. Or, am I too late?
2. I’m confused about deductible vs. non-deductible as it relates to QCDs and RMDS. The bulk of my IRA comes from my company plan which I rolled over into a TIRA when I l retired. Since I was covered by a pension, I assume those contributions were non-deductible.
Permalink Submitted by Peter Lingane on Thu, 2011-12-15 20:22
1. You can direct a QCD to charity from one of your traditional IRAs and have this count against some or all of the required 2011 distribution from your traditional IRAs. You can also direct a QCD from your inherited IRA but this will not count against the 2011 RMD from the inherited IRA since you have already taken this distribution. You cannot direct a QCD from a 401(k) plan.
2. Talk to your previous employer or to your tax preparer about your basis in the company plan. It is likely that distributions from the company plan were fully taxable. Remember that basis is recovered from traditional IRAs pro rata so, if you ever made nondeductible contributions to a traditional IRA, it is likely that part of any distribution from any IRA, including the rollover IRA from the company plan, is not taxed.
Your bases in your traditional and inherited IRAs should be shown on Form 8606 which you should have been filing with your tax return if you have basis.
3. Your financial life is probably unnecessarily complicated with so many plans. Consider rolling the 401(k) to a traditional IRA and consolidating all of your traditional IRAs.
Permalink Submitted by Alan Spross on Thu, 2011-12-15 21:21
[quote=”BARBARA5723″]
In 2010, I took my first RMD: a portion before 12/31/10 and the remainder before 4/1/11.
[/quote]
You should have taken your 2010 RMD totally in 2010. Use of the 4/1 required beginning date only applies to the year you turn 70.5 and that RMD was waived. The RBD does not move forward for a year due to the waiver. This confused alot of people, and therefore I am sure that the IRS would waive any penalty. To request the waiver file a 2010 Form 5329 by itself and request the waiver for reasonable cause, the reason being “confusion over rules affected by the 2009 RMD waiver”. Send a copy of the distribution statement for the amount you took prior to 4/1/2011 and that should take care of it.
With respect to your rollover IRA created from the 401k rollover, you should determine if any part of that rollover was after tax contributions. You can tell if any of it was after tax from your 1099R forms from the year of the rollover. If the rollover was before 2002, don’t bother because all of it would have been pre tax, ie no after tax contributions could have been rolled over before 2002. If you find that some of the rollover was from after tax contributions to the plan, you can file the 8606 currently and it will make some of your RMDs tax free.
Any QCD is deemed to come first from the pre tax IRA balance, so making a QCD would not require an 8606 and it would increase your % basis in the IRA remaining (but not the dollar basis).
Permalink Submitted by BARBARA ROSEN on Thu, 2011-12-15 22:45
To recap and determine if I understand correctly, I can request a partial QCD from the remaining RMD for 2011, and then request a distribution for the balance (all, of course, before 12/31/11).
Mea culpa! Actually I was 70 in 2009, but 70.5 in 2010. Phew. I’m glad took the RMDS for 2010 correctly. Sorry for the confusion.
Also, as far as I can determine, I did not make any after-tax contributions.
Thanks Peter and Alan.
Permalink Submitted by Alan Spross on Thu, 2011-12-15 23:20
Ok, good.
Yes, you can select a QCD amount from the TIRA that is less than, equal to, or more than your RMD.
1) If less than, only the excess to meet the RMD will be taxable
2) If equal, nothing taxable
3) If more than the RMD, nothing taxable; but of course your IRA balance will drop more
Remember that the QCD must be done by direct transfer, but that includes having the check made out to the charity, mailed to you and you forward it to the charity. Check cannot be made out to you.
The 1099R will just show the total distributed amount for the year with no reference to the QCD. You report the QCD on line 15b of Form 1040, just like you would report a rollover, but show “QCD”.
Permalink Submitted by BARBARA ROSEN on Fri, 2011-12-16 19:17
Since I’m taking a QCD for less than the total RMD for 2011, shouldn’t the excess, which is taxable, be reported on line 15b and the total RMD reported on 15a of the 1040. That’s the same way I show social security benefits (lines 20a and 20b); on line 20a total benefits are listed, and 20b) lists the taxable amount.
Thank you for your response.
Permalink Submitted by Alan Spross on Fri, 2011-12-16 19:29
Yes, that is basically it, but your line 15 will include the distributions from the inherited IRA as well. You would show the total distributions on line 15a and on 15b show only the taxable amount. When you enter “QCD” next to 15b you are telling the IRS that the reduced taxable amount on 15b is due to the QCD.
The 401k distribution goes on lines 16a and 16b. The IRS has some strange rules about lines 16a and 16b when the distribution is fully taxable. They want it entered on 16b only and nothing on 16a.