Under the heading "Qualified charitable distributions." IRS Publication 590-B states: "A qualified charitable distribution (QCD) is generally a nontaxable 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."
Yes it should work since it will be coming directly from the IRA to the charity ... if you write the check to yourself and then write one to the charity that would not fly. Please confirm this with the IRA custodian to be sure.
I disagree with the answer. It is not going directly to the charity. It is going from your traditional IRA to you (your checking account), and then from you to the charity. IRS Pub 590-B states that it must go directly to the charity. You can have your IRA trustee send a check to your address, but the charity must be the only payee on the check.
If your IRA has check writing privileges then you can write a check directly to the charity and it will count as a QCD. Again please confirm this with the trustee of the IRA.
Please provide a source for your answer. I can't believe that writing a check from your IRA checking account qualifies as a non taxable distribution. I can do so, and I have been writing these checks for several years, but I don't think this is considered as going directly from your IRA to the charity.
How can it not be direct ? If you write a check off a personal account it is going from you to the person you are paying .... so when you write a check from an IRA account it is going direct from the IRA to the charity ... how can you see that as anything different ? This is exactly the same as if the trustee had cut a check ... just saves the middleman and usually a fee. Not many people have check writing abilities on IRA accounts so it is not well known item.
However if the check was written to the IRA owner, put in the IRA owner's account and then a check written from the personal account to the charity that would not be allowed.
My IRA trustee makes my required minimum distributions by transferring the funds from my traditional IRA account to my checking account. I can't imagine any trustee would permit checks to be written directly on the IRA account itself. Therefore that is why I don't think my writing checks from my IRA account would be considered by the IRA as going directly from my IRA to my charity.
Yes ... but some do ... they are usually called self directed accounts and not many people have them but they do exist. If the check is written to the charity and only the charity can cash it then it counts for the QCD.
Bottom line for you: "Although Vanguard offers check writing, the firm requests that you either fill out a form or call to make the transfer for the donation to count as a QCD, says spokesperson Emily Farrell. Vanguard makes the check out to the charity and sends it to you to forward." According to the article, however, Fidelity will allow you to write checks with just a couple of caveats which are easily complied with.
I have an indirect answer that involves the IRS. I had been doing QCDs from my IRA via Fidelity Ira checks since they were first allowed. On my 2017 return I was audited for not reporting my RMD and asking for payment with penalties. I just sent them copies of all the IRA checks to charities that year (front and back) and they responded by canceling the assessment and penalties. Seems pretty clear that the IRA checks made out to the charities are fine.
In my last message about QCD I should have mentioned that TT completed the iQCD info correctly on my 1040. So why did the IRS separate out my return for audit and claim that I had not reported the RMD from my IRA?.......who knows!
To be on the safe side, I would highly recommend following the IRS guidance exactly: The check must be issued "directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax-deductible contributions." [IRS Pub. 590-B - Distributions from Individual Retirement Accounts (IRAs), p. 13, column 1]
You were very fortunate that the IRS representative cancelled the assessment and penalties, but I wouldn't count on this treatment in the future. The IRS rules very clearly state that the check has to come from the trustee of the IRA.
Thanks for the heads up, but the checks that I write on my IRA clearly list Fidelity Trust as the Trustee of the account. I talked to Fidelity about this when I started doing the QDCs right at the beginning and they confirmed their checks would qualify, but just to be safe I will talk to them again. Thanks for communicating on this.
See IRS Notice 2007-7, Q&A-41. I got this from the following article.
https://www.journalofaccountancy.com/issues/2018/oct/irs-qualified-charitable-distributions.html.
I checked the reference and indeed it supports writing an IRA Check directly to the charity.
Just be aware that if this is done late in the year it can be problematic. The check must clear before the end of the year so that it gets reported as a distribution for that year. If the charity is slow to deposit the check and it doesn't get deposited until next year, you've effectively made the charitable contribution for next year, not this year.
My IRA custodian is Schwab. They suggested that I get a checkbook for the my IRA account, and write my IRA account checks to be payable directly to the charities. Qualifies as QCD
Form the beginning I posted that one should check with the IRA trustee for instructions to see if anything more needs to be done other than writing the check to the charity. If you have an RMD then they may need to at least know about it so they complete the 1099-R properly.
Whether to check is written to a charity or not will not impact the 1099-R.
The 1099-R contains no information regarding QCDs.
The main thing to keep in mind is that the check should be written and sent to the
charity 2-4 weeks before the end of the year. Otherwise,
the distribution may be reported in the year after the check was written.
I have several clients who write IRA checks and have had no problem with them
not being reported as a distribution on the 1099-R.
After reading all of this, the important question for me is will TT ask the appropriate questions and then generate the correct form 8606?
Yes it asks the correct questions if you go slow and read the screens carefully ... remember the interview is set up on a "tree branch " system so depending on how you answer a question now will dictate the questions it will ask going forward. For instance if you did not click on the "I own a Home" button it will not automatically bring up any home ownership questions. Not that you cannot get to them later yourself but the program will not walk you down that path automatically.
Just keep in mind that if your IRA custodian makes a distribution to the charity on your behalf, the amount will appear on the 1099-R for the year they write the check. If you write a check to the charity out of an IRA checking account, it will appear on the 1099-R of the year the charity cashes the check.
This is particularly important if the charitable donation is part of the required minimum distribution (RMD) and you're making the donation at the end of the year.