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1099-R and Charity


Edsel

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As fewer people are itemizing, those who are old enough for RMDs are increasingly directing retirement distributions to be sent to charities.  The effect is to reduce taxable income, and to correspondingly invalidate charitable deductions (which most of them can't use anyway).

I have a few of these clients.  I have seen 1099-Rs showing gross distributions with zero as taxable amounts.  This year one of them is showing the amount contributed as gross distribution and taxable as well.  And the "taxable amount not determined" is checked.

My client went back to his stockbroker to question this.  He was told the 1099-R was correct as issued, and he would not correct it.  He was also told that the "very finest tax people" are insisting this was the proper issuance of a 1099-R under the circumstances, which are known.

I believe this will result in my client ultimately being taxed on the higher amount, and will find relief upon meticulous presentation of records.  Before entertaining the presentation of records, the IRS will first send him back to the issuer to get the 1099-R corrected.

What say ye?

 

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The broker is not verifying that the charities are qualified per the IRS. "Taxable amount not determined" is correct. The tax preparer with the client determine and report as your software allows for QCD to print. (In my software, I have a tab where I put the amount of the Qualified charitable distribution.) On 2018's 1040, line 4a was $100,000; b was QCD; 4b was $95,000, for example. I keep the acknowledgements from my church and charities with my tax return; plus Morgan Stanley did provide a detailed list.

I've been doing this and talking to my clients about doing it.

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Yes Lion, that's the way I understand it.  1099R will show full distribution so as to become part of client's RMD.  Then on the return, back it out of taxable with the QCD code.  Keep receipts from charity.  Client should also have monthly statement from broker showing distribution directly to charity.  Distributions must be sent directly to charity, not passing thru the hands of client.

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24 minutes ago, Randall said:

Yes Lion, that's the way I understand it.  1099R will show full distribution so as to become part of client's RMD.  Then on the return, back it out of taxable with the QCD code.  Keep receipts from charity.  Client should also have monthly statement from broker showing distribution directly to charity.  Distributions must be sent directly to charity, not passing thru the hands of client.

My understanding from reading the IRS instructions is that as long as the check is payable to the charity, it can be sent to the client for delivery to the charity.  But I agree with what has been said.

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20 hours ago, Gail in Virginia said:

...as long as the check is payable to the charity, it can be sent to the client...

I recently read a discussion about this in another (Drake?) forum.   Most said this was the way to go AFTER a copy of the check was retained for the client's file.

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  • 11 months later...

Thanks all for the help.   I just did my first one of these and the software made it very easy.  I was worried because there was the QCD portion and another portion that was taxable.   All the documentation is perfect (letter from the Broker, acceptance letter from charity) so I am feeling good.

Tom
Modesto, CA

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