QCD Rant

[Abby Normal]

Why, in the interest of sanity (mine), did they not add a box to 1099Rs for the QCD amount!?!? If the client doesn't tell you, you have zero way of knowing! Guess I need to add a question to the organizer.

[Lion EA]

The payer is not obligated to check if the payee is an IRS qualified charity. That's on the taxpayer -- and, as you say, US. Like everything else! And, your client is supposed to keep his acknowledgement letters from the charities.

[jasdlm]

I have trouble with this, also.  For some reason, clients think we are going to get this information via osmosis.  

The only clue I've figured out is if withholding is wonky (strange percentage because only part of the distribution was QCD) or nonexistence, prompting me to ask the client.

Grrrr.

[Abby Normal]

2 hours ago, Lion EA said:

acknowledgement letters from the charities

The letter from the charities isn't going to indicate that it was a QCD. The client I'm working on now had letters from the IRA trustee for each donation she made as a QCD, and the client was kind enough to give all of those to me, but if the IRS form had a box on it for POTENTIAL QCD, then we'd at least know to take care of it.

The, of course, the client lists all of the donations including the ones that were made with QCDs, so you have to back them out. They should have put a line on Sch A charitable showing a subtraction in the amount of the QCD.

This isn't rocket surgery!

[Lion EA]

Morgan Stanley included behind their Forms 1099-R a list of amounts transferred via checks directly to other than me. They don't say nor do they know if they were actually charities. But, I've put the acknowledgment letters with that list. Several of my clients use MS, also. (My broker is a good source of referrals.) It will take a lot of client training! Maybe over time, we'll see more consistency in broker reporting, too.

[jklcpa]

5 minutes ago, Lion EA said:

Maybe over time, we'll see more consistency in broker reporting, too.

 

I'm not going to hold my breath waiting for that to happen; we'll probably all be retired by then. After all, how long did it take for brokers to be forced to report basis of stocks sold?

[Roberts]

How about an IRA rollover that is coded as a 7 normal distribution, the client doesn't mention it and when asked says yeah she got the money? You wait two days to efile because it doesn't feel right and 2 hours after it is transmitted they call to tell you their advisor says it was a rollover so non-taxable and says I should have been able to figure that out from the code. Why did it take your advisor 2 days to figure this out? Oh she's really busy.

 

Had another client do a humdinger several years ago but oh she rolled her $150k IRA into a Roth IRA so she can pay the tax over two years instead of one to save a lot of money. When I said that if she had taken out $10,000 per year for the rest of her life she wouldn't have paid hardly any tax at all it amazingly became all my fault. I'm going to wager that next year her new tax preparer didn't include the other half of her rollover.

[Gail in Virginia]

 I like the advisors that tell the client to put the money in traditional IRA and then convert it to Roth, no taxes and back door Roth contribution they otherwise would not qualify for.  Wonderful plan, except they have $150,000 balance in their traditional IRA and have to include the biggest portion of the contribution they take out as income.  And I get to try to explain that. 

[ETax847]

I added a question to the Tax Organizer in all caps.  This has made life much easier.

[Max W]

4 hours ago, Abby Normal said:

Why, in the interest of sanity (mine), did they not add a box to 1099Rs for the QCD amount!?!? If the client doesn't tell you, you have zero way of knowing! Guess I need to add a question to the organizer.

I think that adding a question is the most immediate solution, but there is no reason (except for bureaucratic inertia) that the IRS could not  add a box on the 1099R showing the QCD amount and add a secondary code, as well. 

[Abby Normal]

With fewer people itemizing, we're going to be seeing a lot more of these.

[Abby Normal]

Here's my first draft of an organizer question. Feedback appreciated. Using ETax847's suggestion of all caps.

DID MAKE MAKE ONE OF THOSE $%&*# QCD DISTRIBUTIONS FROM YOUR IRA?! IF YOU DID, AND YOU DON'T TELL ME ALL THE DETAILS, YOU'RE FIRED! DO YOU HEAR ME?! I SAID FIRED!!! AND DON'T YOU DARE INCLUDE THE DONATION IN YOUR TOTAL DONATIONS OR I WILL HUNT YOU DOWN.

[BulldogTom]

35 minutes ago, Abby Normal said:

Here's my first draft of an organizer question. Feedback appreciated. Using ETax847's suggestion of all caps.

DID MAKE MAKE ONE OF THOSE $%&*# QCD DISTRIBUTIONS FROM YOUR IRA?! IF YOU DID, AND YOU DON'T TELL ME ALL THE DETAILS, YOU'RE FIRED! DO YOU HEAR ME?! I SAID FIRED!!! AND DON'T YOU DARE INCLUDE THE DONATION IN YOUR TOTAL DONATIONS OR I WILL HUNT YOU DOWN.

You need to tell them you will refer them to your friend RITA THE GOOD HUGGER.

Tom
Modesto, CA

[Gail in Virginia]

23 minutes ago, BulldogTom said:

You need to tell them you will refer them to your friend RITA THE GOOD HUGGER.

Tom
Modesto, CA

Does Rita have to wait until social distancing is over to hug people now?  And is social distancing an actual word?

[Abby Normal]

I think social distancing was my family's motto.