How to enter QCD

[rdanderson]

We are considering making a contribution to a qualified charity directly from our IRA.  As I understand it, when we receive our 1099-R from our brokerage, they will show our total IRA distribution in box 1 which will include our QCD contribution as well as our normal distribution.  Also, in box 2a they will show the same amount and the box in 2b stating "Taxable amount not determined" is checked.

So, now when I enter the information for my 1099-R into Turbotax, if I enter the same infomaton as on the 1099-R, I do not see where the QCD will be accounted for.  In the IRS instructions, it says on form 1040 line 4a should be the total distribution and line 4b should be the taxable portion with "QCD" written next to the value.  How do I enter this information into Turbotax?  This will be a question for my 2023 taxes, but I want to know how I will handle the entry before we make the charitable contribution.

[SteamTrain]

OK...first things first.

1)  For the IRA the $$ are coming from, the owner of that IRA will have to be age 70.5 (edited) or older during 2023....such that they are required to take an RMD from that person's IRAs....only then can part of the distribution be claimed as a QCD.  Otherwise it is just a separate charitable contribution.

2) If you turn 70.5 (edited) in 2023, and are looking at the 2022 software to see what questions are asked, the software will not show the proper RMD/QCD questions because you were not 70.5 (edited) during 2022.  Do not mess with an Online account to test the situation out....you would irreversibly mess up your 2022 file.....BUT IF you are testing with the Desktop 2022 software, Save-AS your 2022 file to a second test file, and only fool with that test file.....then change the IRA owner's birthdate to show they were age 70.5 (edited) or older during 2022.

3) when you enter, or edit that person's IRA 1099-R form to indicate there was a QCD distribution, there will be follow-up questions after the main form for that 1099-R form. Depending on whether you are using "Online" software, or the "Desktop" software, the progression may be somewhat different ....but follows the same general progression as you step thru..

....3a)   A question about where the distribution was from related to possible state handling.

....3b) A question about whether the IRA was inherited or not.

....3c)  A couple questions about whether the distribution was an RMD or not.

(edited: The question in 3c) is only asked if you are age 72 or older. If age 70.5 or 71, the software skips directly to 3d) below)

and then

....3d) a question about whether, All, Part, or None of the distribution was transferred to a charity.

.......3e) then how much was transferred if you selected Part.  

Questions 3c)-thru-3e) are not asked if you were not age 70.5 (edited) or older for that tax year.

AND....for the All or Part in 3d) and 3e), the $$ indicated there will remove those $$ from line 4b and will trigger the QCD indication on line 4b of the form 1040 (Assuming the IRS doesn't change the numbering on the 2023 tax form).

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When the QCD is taken and indicated there, you do NOT also enter the $$ as a charitable contribution on the Deductions&Credits page.  You get the full deduction just once as the QCD.

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If the owner of the IRA was not at least 70.5 (edited) during 2023, then a QCD is not allowed, and usually, all the $$ will go in as taxable income,  but the amount can then be used as a separate charitable donation, and might be able to be removed from taxable income if you have enough total "Itemized" deductions that tax year such that the standard deduction is exceeded for your filing status.

( @dmertz     hope I got that all right )

[VolvoGirl]

Are you sure the age increases?  From what I can tell it is still 70 1/2 even if your RMD is 72.  @dmertz 

[SteamTrain]

@VolvoGirl  @rdanderson 

Yeah, I could be off on that age...but I thought the 70.5 minimum age part had passed for the RMD change-over and we were into 72+ only ages.

Q is for tax year 2023 if that makes a difference.

True....I'm hazy on that at this point.

________________

I may edit that minimum age...if needed.

[rdanderson]

Thanks for the help.  Age was not an issue because we have already passed that threshold.  I did make a copy of 2022 taxes to play with in house.  When I earlier just tried to edit the IRA withdrawl from last year I did not get all the questions.  So, I just tried to enter a new withdrawal and the program took me through the questions as you mentioned.  Thanks again.  With this reassurance, we will go ahead and make the contribution.

[SteamTrain]

Poking around....it sems I may need to use age 70.5

I'll edit  (then change back again if that's wrong....hah !)

[Critter-3]

OK ... simple answer is just  FOLLOW  the interview screens in the 1099-R section to indicate how much of the distribution was for the QCD  and let the program do the rest for you automatically.  

[SteamTrain]

As a side note:  When entering the 1099-R from the IRA, you do have to make sure the "IRA/SEP/SIMPLE" box is checked near boxes 7&8.  If you miss checking that box, the QCD questions are not asked, no matter what your age.

[dmertz]

In the Form 1099-R it will also have code 7 in box 7 and the IRA/SEP/SIMPLE box marked.  Failing to mark the IRA/SEP/SIMPLE box will prevent TurboTax from asking if any of these gross amount was transferred to charity.  [I see that Steam Train has already mentioned this.]

Regarding age, if you are using 2022 TurboTax to simulate a 2023 tax return, reduce your birth year by 1 so that TurboTax uses the correct age for 2023.  If you are reaching age 70½ in 2023 but don't reduce your birth year by 1, 2022 TurboTax will determine that you have not yet reached age 70½.

In the CD/download version of TurboTax TurboTax, TurboTax will ask the question as to whether or not any of the funds were transferred to charity and, if you indicate that only part was transferred to charity, will ask the amount.

In the Online version of TurboTax in the page that asks, "Do any of these situations apply to you?," mark the box to indicate that you transferred all or part of the money to charity.  TurboTax will then ask the amount.

With either version, TurboTax will include the entire gross amount on Form 1040 line 4a but will exclude the QCD from the amount on line 4b and include the "QCD" notation next to the line.