One of the two retirement industry Easter eggs hidden in the omnibus "fiscal cliff" fix now has a bit more clarity for those clients hoping to maximize their IRA donations to charity.
As part of the American Taxpayer Relief Act of 2012, the qualified charitable distribution provisions for 2012 and 2013 have been extended to allow taxpayers to have a donation made by Feb. 1, 2013 qualify as a 2012 tax year QCD.
As the IRS explains in a new bulletin, individuals aged 70 1/2 and over can make distributions of up to $100,000 from their IRA (except for ongoing SEPs or SIMPLE IRAs), in order to satisfy any IRA required minimum distributions for the year.
Under this short-term extension, IRA owners can make contributions to a qualified charity provided the contribution is a cash contribution of all or part of an IRA distribution made to the IRA owner in Dec. 2012, as long as the contribution would have been a 2012 QCD if it had been paid directly from the IRA to the charity in 2012.
IRA owners should keep records to substantiate the timing of contributions and distributions regarding any 2012 QCD made in January 2013.
A QCD made in January 2013 that is treated as a 2012 QCD will satisfy the IRA owner’s unmade 2012 RMD if the amount of the QCD equals or exceeds the 2012 RMD. However, no part of such a QCD can be used to satisfy the 2013 RMD, even if the 2012 RMD had already been made. In determining the RMD for 2013, the 2012 QCD must be subtracted from the December 31, 2012, IRA account balance(s).
Reporting for the distributions includes the following:
Form 1099-R – IRA trustees must report distributions as follows:
Form 1040 – IRA owners must report 2012 QCDs made in January 2013 on their 2012 Form 1040 by:
Note. A 2012 QCD made in January 2013 must also be reported on the IRA owner’s 2013 Form 1040. These reporting requirements will be reflected in the 2013 Instructions for Form 1040.
IRA owners must file a 2012 Form 8606, Nondeductible IRAs, with their 2012 Form 1040 if:
If a 2012 Form 8606 must be filed, the instructions to the form will describe how to report any 2012 QCD made in January 2013.
The full text of the IRS brief is available here.