How to Enter a QCD?

[edaustin1952]

Last year, I rolled over some money from my 401K to a Rollover IRA.  A few days later, I called the company handling my IRA and had a QCD check sent directly to a charity (local church) for the full amount that I had moved to the IRA.  The church received the check and all seemed to work fine.  In late January, I received a 1099-R from the company with Distribution Code G and a blank IRA/SEP/SIMPLE box. 

I entered my deductions into TurboTax Premier but did not include the QCD in the deductions for the charity.  I entered the 1099-R exactly as printed on the form.  TurboTax did not ask any questions about QCD.  The taxable amount (box 2a on the 1099-R) was $0.00.  All of this information shows up on Form 1040 on line 5a and 5b with the word ROLLOVER showing.  The QCD isn't being taxed but the QCD is supposed to show up in line 4a and 4b of Form 1040 per IRS instructions (https://www.irs.gov/instructions/i1040gi).  

I tried updating the Qualified Charitable Distribution on the TurboTax Form 1099-R with the amount.  When I do that, TurboTax says there is an error when I run Smart Check.

How am I supposed to enter the QCD amount so that it shows up in line 4a and 4b on Form 1040?

[Mike9241]

are you 70 1/2? if not then the pension is taxable  (box 2 is often left blank but needs to be completed) and the "QCD" needs to be entered directly in Schedule A.  Turbotax will only ask questions about QCD if you are over 70 1/2 

with a proper QCD the gross distribution shows up on 4a but only the taxable portion shows up on 4b after deducting the QCD. nothing gets deducted if it isn't a QCD 

a QCD never shows up on 4b. the whole purpose of a QCD is to allow distribution from an IRA after the taxpayer is 70 1/2 and if transferred directly to charity (max $100,000) the taxable portion of the distribution is reduced by the QCD so the taxpayer gets no charitable deduction.  this is usually much better for a taxpayer because AGI is reduced.  

[DaveF1006 · Accepted solution]

It depends. in your instance, you should have two 1099R's, one for the rollover from the 401K to the IRA and one for the IRA distribution provided all this happened in 2022. You do this so the IRS has a complete paper trail on how the money was distributed..

I think what you have done was to report the rollover 401K distribution. You did not report the IRA distribution and this is why there are no entries in 4A & 4B of your return showing the QCD in the margins. Here is the correct way to report.

1. Go to federal>wages and income>all income
2. Retirement plans and Social Security>show more 
3. Ira (401K), pension plan Withdrawals(1099R) Start
4. Here you will enter your 1099R.  After you are done with one and reach a summary screen.  Here your first 1099R reporting the rollover should appear. 
5. Next you will add the second 1099R that you should have received. 
6. Enter the information into the return, this time however you will check the IRA/SIMPLE/SEP box.
7. One this second 1099R has been entered, there will be a follow-up screen entitled do any of these situations apply to you? Here you will indicate you transferred this to charity.
8. Then it will ask you what your RMD distribution was for the year.
9. Lastly it will ask how much of this was transferred to charity.? Here you will list the full amount if this is the case.

Without the second 1099R, you would not had an opportunity to list your QCD because this entry is unavailable in the first 1099R because the QCD is not available for 401K distributions.  Meanwhile, here is what the screens that I mentioned should look like in Turbo Tax Online.  These are similar for the Desktop product as well.

[edaustin1952]

Thanks for the reply.  Yes, I turned 70 & 1/2 last year before I did my QCD.  I waited a few weeks past that day to initiate the IRA rollover.   But TurboTax doesn't ask me any questions after entering the 1099-R information.  I read some of last years problems with RMDs and I went in and changed my birth date to be 4 years earlier but that didn't make any difference.  I have changed my birth date back to the correct date. 

Per the instruction on the IRS website (https://www.irs.gov/instructions/i1040gi), "Exception 3.  If all or part of the distribution is a qualified charitable distribution (QCD), enter the total distribution on line 4a. If the total amount distributed is a QCD, enter -0- on line 4b. If only part of the distribution is a QCD, enter the part that is not a QCD on line 4b unless Exception 2 applies to that part. Enter “QCD” next to line 4b."   So I believe that my QCD is supposed to show up on line 4 of Form 1040.

You mentioned entering the QCD in Schedule A.  Where?  As part of "Gifts to Charity"?  I don't think that would be right.  Then the QCD would be considered as a deduction. 

[edaustin1952]

Makes sense!  I will contact the company and ask for the 2nd 1099-R to show the QCD.  Thanks

[dmertz]

The Form 1099-R from the IRA custodian will just show a normal distribution with code 7.  It will not specify the distribution as being a QCD, you'll do that when you enter the From 1099-R as described by Opus 17.

(The assumption here is that the QCD made "a few days later" was done in 2022 and not early in 2023.  If the QCD was done in 2023, it will be reportable on your 2023 tax return.)

[33paulk88]

Sorry, thought reply was going to provide answer! Having same issue and also need answer. You did a great job of clearly describing the problem. Thanks