RMD

If a check is written on 12/29/2019 as a QCD but not cashed/cleared until 1/2/2020 does it count toward the RMD for 2019 or 2020?



We in the charitable community are told that if a QCD check doesn’t clear in one year it will count in the next year.  We have been diligent in telling charities to deposit checks before December 31 so that their donor is not subject to penalty and taxes for not taking their current-year RMD.



Further question on this:  Same fact set, but assuming the donor had satisfied their 2019 RMD requirement already, how would this distribution (since it was sent out of the IRA in 2019) be treated for 2019 tax purposes and 2020 tax/RMD purposes assuming that no RMD has been taken yet in 2020.  



MCaldwell,If a QCD check is issued from your IRA account through the investment company (e.g. Vanguard) and sent to you for transmittal to your charity, that distribution in going to reported on the Form 1099-R for the year the investment company issues it. If you have checkwriting abilities attached to your particular IRA account and you issue a check yourself, that may be a different matter and I don’t know how the IRS and the investment company is going to look at it.  It might, repeat might, be dependent on the year the check clears.  Let’s see what others have to say.



In checking with the custodian they indicated the check would have to be cleared by year end for it to count toward the 2019 RMD..  Otherwise, the calulations they make for 2020 RMDs would not be correct.  Does that make sense?



  • The 1099R for 2019 will include the QCD distribution along with all other 2019 distributions. The only time it might not is when the IRA owner has checkwriting and the cancelled check is not returned to the custodian by year end so the custodian is not aware of the check having been written on the IRA. But let’s dismiss that situation here because only a few people have IRA checkwriting.
  • When the 1099R shows the distribution, the next issue is what requirements exist to qualify for a charitable contribution. These are the same as for any charitable contribution. To be absolutely sure of no IRA challenges, the charity should cash the check in 2019. If not, the next best situation is where there is documentation that the charity RECEIVED the check in 2019. And finally, the weakest but still possibly acceptable situation are the postmark rules such that if the IRA owner can document that the check was mailed by year end, it will still be acceptable. I have not heard of the IRS requesting any evidence to establish the date of delivery to the charity, but that might happen for larger QCDs closer to the 100k limit.
  • Assuming the 1099R reports the QCD distribution and it was delivered to the charity, then the annual timing issues come into play. For the QCD to offset a taxable RMD, the RMD cannot already have been completed. In other words, at the time of the QCD distribution, there must be enough RMD left to complete in order to have the QCD offset the RMD.
  • Worst case scenario – IRA owner misplaces the check and it does not leave his possession until 2020. The 1099R is not going to be reissued but perhaps if the check is returned to the IRA custodian, they will replace it with a check to the IRA owner, in which case the RMD will be satisfied for 2019, but there is no QCD. Then start over in 2020.  
  • I would recommend extra effort to make sure the charity understands the need to cash checks quickly, and also to complete all QCD requests by very early December to provide time to get the check to the charity and for the charity to cash the check.


mcaldwell – is the check you refer to written by the IRA owner with IRA check writing, or issued by the custodian at IRA owner’s request?



It was issued by the custodian at the donor’s request.



I don’t know if that is typical for custodians. They are denying the ability to use constructive receipt by the charity to give the benefit of the doubt to the IRA owner. A custodian has no idea what other IRA accounts the client might own that could have satisfied the RMD under the aggregation rules, so they cannot comment about someone’s total RMD. But there approach suggests that they are not going to report the distribution on the 1099R either, and if not treated as distributed, the year end balance is going to be higher, increasing the following year RMD. Are they going to stop payment on the check as well to prevent the charity from cashing it in January? Would suggest verification of these other issues as well, so they or the client do not compound an error into a mess that is not easily correctible. Actually, I have seen very few reports of these issues, so this custodian may be unique. IRA owners need to determine the custodian’s administrative procedures to prevent these issues and perhaps they need to consider another custodian if they plan to request QCD checks. 



Alan – Not much has been mentioned about the timing of a QCD, but it seems to me that a late QCD can sometimes lead to issues.  I try to accomplish my QCDs very early in the fourth quarter to ensure the proper distribution, receipt, and accounting for the QCD.  I then complete my RMD for the year and can follow up on any QCD acknowledgement not received in a timely manner. 



Good point, Tom. Many timing errors go unnoticed by the IRS since distribution dates are not provided to the IRS. Nonetheless, if discovered at audit, and the RMD was fully completed prior to the QCD, the QCD won’t offset any RMD income. There is also a year end challenge to make sure charities cash the checks promptly, and a different set of challenges if the taxpayer uses check writing for QCDs. More custodian are starting to encourage IRA checkwriting, presumably because it reduced custodian expenses. 



Add new comment

Log in or register to post comments