1099-R Charitable Contribution error

Forum|Forum|1 year ago
March 31, 2025
1 reply
10 views

Good evening, everyone.

I have a client who had a traditional IRA distribution via 1099-R, and of the total box one and box two distribution, $7k was for a charitable contribution for TY2024. Unfortunately, due to USPS issues, the check never arrived at the organization and was not cashed, but was also not discovered by the client until this year (2025).

The financial house will not correct the 1099-R to indicate the funds were not distributed in 2024 (2 hours on the phone). They also will not reissue the contribution stating it was for TY 2024 since it is now 2025. They have said the contribution can only be reported for the year the check is sent.

So, how do I correctly report the 1099-R as less taxable by the unreceived $7k, since the funds weren't distributed to either the client or the charity? I feel like if I just adjust the amount in box 2, it is going to trigger a letter or audit by the IRS due to not matching up with the reported document.

Thanks, y'all. I've never experienced this before!

Devera

ProSeries Professional

This topic has been closed for replies.

Best answer by rbynaker

I mostly agree with IRMN (unless this is one of those posts where the facts keep changing when people don't like the answers they're given) but I am curious, what happened to the $7,000? If the broker says they took it out of the account don't they either need to put it back when the check doesn't clear or reissue the uncashed check in some form? How did the taxpayer know that the check was not cashed?

Some IRA accounts have a checkbook now so folks can write their own checks to charity. These won't come out of the account until they clear the bank (because that's the only way the broker knows you wrote a check) so I strongly discourage clients from waiting until December to mail these things.

Starting in 2025 there's a new code "Y" for the 1099-R (see PDF page 9) for QCDs. I haven't looked to see what the rules might be for how the broker knows which payments go to qualified charities and which don't. But that's a next-year problem. I'm guessing taxpayers will just "self-certify" (i.e. "check this box if you don't want the IRS to tax you on this distribution").

Rick

IRonMaN

Level 15

The organization never received the contribution so your client doesn't get the deduction. The full $7,000 is taxable.

Slava Ukraini!

D

DeveraCAuthor

Level 4

Really? But the check wasn't cashed and he wasn't distributed the money directly. They have canceled that check to the organization so the money went back into his IRA (although technically in 2025.)

rbynaker

Level 13

@DeveraC wrote:

Really? But the check wasn't cashed and he wasn't distributed the money directly. They have canceled that check to the organization so the money went back into his IRA (although technically in 2025.)

It's a bad situation any way you look at it. If it's the broker's position that the $7,000 was distributed in 2024 (which may be iffy) then how do they report the $7,000 that was un-distributed in 2025? As a contribution? Rollover? Was it within 60 days (I doubt it since most checks are good for 90-180 days)?

If instead we pretend the $7,000 wasn't distributed in 2024 (which may be iffy, I'd bet there's a quarterly statement somewhere showing the money coming out), did the taxpayer miss their RMD? Pick your poison.

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