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IRS Tax Reporting

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Many IRA custodians were concerned about how they were to properly report to the IRS charitable IRA gifts their clients made from their IRAs. Without IRS guidance, administrators and custodians were reluctant to process these transactions. Fortunately, the IRS has clarified the tax reporting procedures since the law came into effect.The IRA administrator will provide the donor with a Form 1099-R by Jan. 31 following the year of the gift. It will show the transaction as an IRA distribution. The Form 1099-R is sent to the donor and the IRS. 

  • The IRA administrator will provide the donor with a Form 1099-R by Jan. 31 following the year of the gift. It will show the transaction as an IRA distribution. The Form 1099-R is sent to the donor and the IRS.
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  • Taxpayers will then include that amount on line 15a (IRA distributions) of IRS Form 1040, and include a zero on line 15b (taxable amount) to exclude the distribution from taxable income.
  • These charitable IRA gifts are not included on Schedule A of IRS Form 1040 where regular, tax-deductible charitable gifts

Example:  

  1. John, aged 74, made a charitable IRA gift under this legislation. He had his IRA administrator transfer $10,000 to his favorite charity on Dec. 1, 2011.  
  2. John’s IRA administrator will issue an IRS 1099-R showing the $10,000 distribution from his IRA by Jan. 31, 2012. 
  3. John will include $10,000 on line 15a of his IRS Form 1040 for Tax Year 2011 and $0 on line 15b.  

The rules for tax reporting of these charitable gifts allows the IRA administrator to process these gifts without any liability to determine if the gift qualifies under the law. The duty falls on the donor.

For more information: See the following excerpt from 2009 IRS Instructions for Form 1040, pages 24-25:

If the distribution is a qualified charitable distribution (QCD), enter the total distribution on line 15a. If the total mount distributed is a QCD, enter -0- on line 15b. If only part of the distribution is a QCD, enter the part that is not a QCD on line 15b unless Exception 2 applies to that part. Enter “QCD” next to line 15b.

A QCD is a distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax-deductible contributions (with certain exceptions). You must have been at least age 70½ when the distribution was made. Your total QCDs for the year cannot be more than $100,000. (On a joint return, your spouse can also have a QCD of up to $100,000.) The amount of the QCD is limited to the amount that would otherwise be included in your income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income.

You cannot claim a charitable contribution deduction for any QCD not included in your income.