IRA QCD flow

Forum|Forum|5 years ago
March 31, 2021
2 replies
14 views

Client gave $10k of their RMD via a QCD direct to charities from Traditional IRA. All good. That should reduce their taxable amount by the $10k. Input on screen 13.1 the $10k as a Charitible IRA distribution. So far, so good. Well, then it routes through the 8606 as they have some prior non deductible contributions. My question is this. IF the RMD was $70k, therefore with the $10k QCD only $60k would be taxable. Shouldn’t the amount flowing to the 8606 for the taxable ratio also be this $60k and not the full RMD of $70k? Seems they have lost all tax benefit. Or I am not seeing a calculation / worksheet for this being handled properly. Anyone know? Do I need to do more than fill in the amount in that one box on 13.1?

Lacerte Tax

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Best answer by qbteachmt

Basis is not taken into consideration; QCD bypasses pro rata.

I found this Help article:

https://proconnect.intuit.com/community/charitable-donations-deductions/help/treating-ira-distribution-as-qualified-charitable-deduction-qcd/00/3459

qbteachmtAnswer

Level 15

Basis is not taken into consideration; QCD bypasses pro rata.

I found this Help article:

https://proconnect.intuit.com/community/charitable-donations-deductions/help/treating-ira-distribution-as-qualified-charitable-deduction-qcd/00/3459

Don't yell at us; we're volunteers

loricpa100Author

Level 5

Yes, this is exactly what I would expect it to do - if the IRA were taxable and not routing through the 8606. They took one amount for their RMD. $70k. The 1099R is correct at the $70k as otherwise the RMD would be too low by the $10k. IF there was no 8606, $70k would be on 4a and $60k would be on 4b. Lacerte adjusts for the $10k not being taxable (as the 1099R does not reflect this). No worries all $10k went direct to the charities and meets all those requirements to be a QCD. SOOO, I would think that when it calcs the 8606 - it would reduce - AND I found my error. I did not have an amount for the FMV of all IRAS input. I need the 5498 from the client. SO it was not calcing. For giggles I put in $1m - and now it reduces. Ugh! Are we done yet this year?

qbteachmt

Level 15

You stated: "They took one amount for their RMD. $70k."

And you stated: "No worries all $10k went direct to the charities and meets all those requirements to be a QCD."

Did your taxpayer Touch The Money? Was it in their account, in between the distribution and the donation(s)?

If they did, that is not QCD. That is Charity.

Don't yell at us; we're volunteers

qbteachmt

Level 15

Oh, I just reread this part: "IF the RMD was $70k, therefore with the $10k QCD only $60k would be taxable."

Was there one distributions, two distributions, equitable routine distributions, they got a check made payable to the charity, or how did that split happen?

Don't yell at us; we're volunteers

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