Qualified Contribution to Charity

[Patman2020]

My 1099-R that was used for an RMD and used for go directly to a charity shows $5113.13 in 2a Taxable Amount.  I thought this was supposed to say $0 since it for a qualified charity per the below guidance:

I found this online:

"To report a qualified charitable distribution on your Form 1040 tax return, you generally report the full amount of the charitable distribution on the line for IRA distributions. On the line for the taxable amount, enter zero if the full amount was a qualified charitable distribution. Enter "QCD" next to this line"

Turbotax doesn't have a place to put "QCD" and I'm concerned a disconnect between my 1099-R and return will get it flagged.  Is above guidance correct?

[dmertz]

Your Form 1099-R provided by the payer is correctly prepared and must be entered into TurboTax as received.  The payer has no ability to determine if a distribution paid to a charity from your IRA actually qualifies as a QCD, so they must report the distribution no differently than if the distribution had been paid to you.  To make it nontaxable, it's your responsibility to report it as a QCD on your tax return.

TurboTax automatically excludes the QCD amount from the taxable amount on Form 1040 line 4b and includes the QCD notation next to that line when you answer TurboTax's question asking how much of the distribution was transferred to charity.  However, 2020 TurboTax presently (version R13) has a bug the prevents it from asking the necessary question for those with birthdates between July 1, 1949 and June 30, 1950.  As a workaround for this, with the CD/download version you can provide the QCD-amount information on the 1099-R in forms mode or in any version of TurboTax you can temporarily change your birthdate in TurboTax to something before July 1, 1949, edit the 1099-R form in TurboTax and answer the question asking how much was transferred to charity, then change your birthdate in TurboTax back to your actual birthdate.

[Irene2805]

Please follow the excellent workaround instructions posted by dmertz above.  The issue he mentions affects both the online and download versions of TuroTax.

TurboTax will automatically put the QCD designation once you go through these screens:

1. On the screen after the 1099-R entry screen, Tell us if any of these uncommon situations apply, mark the box I transferred all or part of this money directly to charity.
2. You will be asked on a subsequent screen how much of the distribution was transferred directly to charity.  Enter the amount in the box and click Continue.

[Patman2020]

Thanks for the referenced response

[Patman2020]

Thanks for the information.   This was a decendent IRA RMD distribution and my father was born in 1930.   That said, I'm not being asked the question about how much is charitable.  Hopefully I can use you work-around instructions to remedy this situation.

[Patman2020]

Thanks for the information.   This was a decendent IRA RMD distribution and my father was born in 1930.   That said, I'm not being asked the question about how much is charitable.  Hopefully I can use you work-around instructions to remedy this situation.

[dmertz]

To be eligible to make a QCD from this inherited IRA, you are required to have been at least age 70½ at the time of the distribution; your father's age is not a factor.  If you were born between July 1, 1949 and June 30, 1950, you'll need to use the workaround.  If you were born after June 30, 1950, you were not eligible to make a QCD in 2020.

[Patman2020]

First I've heard of that.  Thanks very much

[dmertz]

Section 408(d)(8)(B)(ii) of the tax code allows QCDs to be made "on or after the date that the individual for whose benefit the plan is maintained has attained age 70½."  In the case of an inherited IRA, the plan is maintained for the benefit of the beneficiary, not for the original participant.

This is further clarified in IRS Notice 2007-7 Q&A-37:

Q-37. Is the exclusion for qualified charitable distributions available for distributions from an IRA maintained for a beneficiary if the beneficiary has attained age 70½ before the distribution is made?

A-37. Yes. The exclusion from gross income for qualified charitable distributions is available for distributions from an IRA maintained for the benefit of a beneficiary after the death of the IRA owner if the beneficiary has attained age 70½ before the distribution is made.

[r2323hall]

HOW DO I OVERRIDE THE ENTRY ON LINE 4 B ON FORM 1040 TO EXCLUDE THE QCD AMOUNT?

[dmertz]

You don't.  You make the QCD indication (that you had some amount transferred directly from the IRA to the charity) during the entry of the Form 1099-R.

To make a QCD you are required to have been at least age 70½ at the time of the distribution.  However, for those with a birthdate between July 1, 1949 and June 30, 1950, 2020 TurboTax presently (now version R16.1) has a bug the prevents it from asking the necessary question regard transfer of the distribution to charity. As a workaround for this, with the CD/download version you can provide the QCD-amount information on the 1099-R in forms mode or in any version of TurboTax you can temporarily change your birthdate in TurboTax to something before July 1, 1949, edit the 1099-R form in TurboTax and answer the question asking how much was transferred to charity, then change your birthdate back in TurboTax back to your actual birthdate.