QCD and deductible IRA contribution age 72

[kwebb11]

Hello,

I need help with how to report a scenario. Husband and wife both age 72. Husband contributed 7k into deductible IRA in April 2021 and then did a $6,600 QCD in December 2021. Finding out now that both can not be accomplished in the same year from the same taxpayer. The $6,600 is either going to be taxable or the IRA contribution needs to be withdrawn as an excess contribution. The gains on the IRA contribution are $296.78. 

Wife also has an IRA and has not made any 2021 contributions. I'm thinking the easiest scenario is to withdraw the 7k from the husband's IRA and place it in the wife's. This allows for the deduction and the QCD on their MFJ return.  My main question is how does this get reported on the 2021 tax return and does the couple need to expect any tax further tax reporting for their 2022 return next year?

Any help would be appreciated!

[VolvoGirl]

Do you both have earned income from working?  You need wages or self employment income to contribute to a IRA.  

[kwebb11]

Yes. Husband has earned income. Wife does not but I believe a spousal contribution can be done based on the husband's earned income.

[dmertz · Accepted solution]

Obtaining a return of contribution from Husband's IRA and instead making a contribution from Wife's IRA, eliminating the deductible contribution from Husband's IRA, would allow the $6,600 charitable contribution to be treated as a QCD.  Husband's contribution could instead be made nondeductible, allowing the $6,600 to be a QCD.

A return of the $7,000 contribution would be reported on the 2021 tax by entering the code P 2022 Form 1099-R that will be received near the end of January 2023.  This will trigger TurboTax to prompt you for the required explanation statement describing the return of contribution.  You'll also have to either omit Husband's the $7,000 traditional IRA contribution from TurboTax, or trigger an excess contribution by entering $7,001 as the contribution and then telling TurboTax that you had $7,001 returned.

Note that TurboTax the amount of deductible contributions made in or after the year you reach age 70½ does not apply just to the year in which such contribution is made, it applies to all years until the amount of taxable distributions has eaten up all of these contributions.   Only then can QCDs be made.  TurboTax does not track deductible contributions made in or after the year one reaches age 70½, you have to do that yourself and claim as a QCD only the amount that you yourself determine is permissible.