Charities, IRAs and Hurricane Sandy | Ed Slott and Company, LLC

Charities, IRAs and Hurricane Sandy

By Joe Cicchinelli, IRA Technical Expert

Follow Me on Twitter:
@JoeCiccEdSlott

Many areas in the Northeast were declared federal disaster areas as a result of Hurricane Sandy. The IRS has provided help for the victims of Hurricane Sandy. Some of the retirement plan initiatives the IRS has announced include:

  • Easing the rules to allow company retirement plans to make loans and hardship distributions to Sandy victims. This rule does not apply to IRAs.
  • Postponing certain tax-related deadlines, such as the 60-day rollover period, the correction of excess contributions, etc. These postponements apply to IRA and company retirement plans.

Many of you have asked how you can help. One way is to donate money or goods to charities that are helping the victims. In order to bring much needed resources and funds to help victims of Hurricane Sandy, the IRS announced an expedited review and approval process for new charities in order to provide relief for the victims. The IRS also continues to encourage you to use existing charities currently working on immediate aid efforts -- the American Red Cross for example.

The IRS reminds you that existing charitable organizations, including churches, synagogues, and other places of worship, are often able to administer relief programs more efficiently than newly formed charities, since they tend to already have fund-raising and distribution infrastructures in place.

The IRS also offers Publication 3833, Disaster Relief: Providing Assistance Through Charitable Organizations, which gives helpful information.

Some of you have asked if you can use your IRA to make charitable donations for Sandy victims. The answer is yes, but you need to be aware of the tax consequences. If you use your IRA funds to donate to a charity, it will be treated as a distribution from your IRA. Accordingly, it will be taxable to you. If you are under age 59 ½, you are also subject to a 10% penalty. You can then claim a tax deduction (if you itemize). The deduction is subject to certain limits, so it might not completely offset the total tax cost of the IRA distribution.

Previously, Qualified Charitable Distributions (QCDs) were available for IRA owners and beneficiaries who were age 70 ½ or older. QCDs were tax-free distributions from IRAs that were directly sent to a charity. Unfortunately, QCDs expired in 2011. Congress has talked about renewing QCDs this year but has not done so yet.

Article Highlights

  • IRS gives some relief for victims of Hurricane Sandy
  • You can use IRA funds to donate to charities helping Sandy victims
  • IRAs used for charitable donations are taxable income to you

 

Receive Ed Slott and Company Articles Straight to Your Inbox!
Enter your email address:

Delivered by FeedBurner

 


Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to matt@irahelp.com for approval.

For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at matt@irahelp.com or (516) 536-8282 with any questions.

 

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.
 

I agree to the terms and services:

You may review the terms and conditions here.