Is my RMD QCD taxable if I also make an IRA contribution?

[Caveman1949]

My wife is 72 years old, but she still works.  She wants to make a $4,000 contribution to her IRA.  She can make the contribution, but this means that $4,000 of her RMD QCD will be taxable.  I think Turbotax missed this weird situation, but I have researched it carefully:

https://www.kitces.com/blog/secure-act-qualified-charitable-distributions-qcd-ira-contribution-age-r...

Google "QCD anti-abuse provision" to learn more about this issue.  This issue is not addressed by Turbotax, so this is a bug that needs to be fixed!

"For every dollar you add to your IRA past age 70 1/2, the IRS will remove the QCD tax shield for later QCDs. 

[MarilynG1]

For your 2020 return, no 1099-R distribution is considered RMD, so don't indicate that when you make your entry.

Click this link for more info on RMD for 2020. 

After entering your 1099-R, the screen that asks whether you transferred any of the distribution to charity doesn't say "QCD," but that's what it's about.

If you answer that you transferred part of the distribution to charity, the next screen will ask you how much was transferred to charity. 

This will not be taxable.  

[dmertz · Accepted solution]

TurboTax does not support this anti-abuse provision.  It has nothing to do with RMDs or being able to exclude the entire QCD from taxable income under these circumstances.  Under these circumstances, some or all of the QCD is taxable.

[dmertz]

Note that there also doesn't yet seem to be any guidance from the IRS on how to report the taxable portion of a QCD.

[Caveman1949]

Under the Secure Act, working people can contribute to a regular IRA if they are now over age 70.5.

However, if a person EVER makes a tax-deductible contribution to an IRA after age 70.5, then the amount of the QCD that can be excluded from taxable income is reduced by that amount contributed to the IRA. IRS section 408(d)(8)(A)

The taxable amount of the donation therefore could be an itemized deduction if one can itemize.

[Anonymous]

MarilynG1, I don't understand why you've mentioned 2020 distributions. The original poster did not mention that year, so I assume the question was regarding 2021 distributions.

I am very disappointed the TurboTax does not even give a clue regarding the need to reduce the amount of the QCD when a previous IRA contribution has been done. (I wonder if "guaranteed accuracy" would cover that omission if the IRS catches it on a return. Or do "calculation errors" cover only arithmetic?)

[SweetieJean]

@Anonymous  The original question was posted in February 2021, so refers to tax year 2020.

[Anonymous]

@SweetieJean, that's a fair point that I missed.

No tax year was mentioned, and I interpreted the original post as asking about future events (i.e., for TY2021 and later). The original poster seemed alert about taxes, since he was aware of the QCD issue, so I'm guessing that he knew about the waiver of 2020 RMDs.

It would have been nice if @MarilynG1 (an "Employee Tax Expert") had not responded to a question that was not asked, and instead had addressed the point of the original post: "This issue is not addressed by Turbotax, so this is a bug that needs to be fixed!"

It's now more than a year later, and the issue is still not addressed in TurboTax as far as I can tell (but I'd be happy to be told what I'm missing).