Qualified Charitable Contribution (OCD) from Roll-Over IRA

[GodFather]

MFJ client both 71 years old.  They take the standard deduction each year, with itemized items well below standard.  They would like to make a QCD directly from their Roll-Over IRA.  I have little experience with this.  My research indicates:

- They do not need to make an RMD until they reach 73.

- They can inform their IRA administrator to make the contribution directly to the charity.  Can they consider this amount as their RMD?  If so, I believe the amount would be excluded from their taxable income.

- Can the OCD be considered a charitable contribution, allowing them to itemize?  Since the amount is excluded from taxable income, I would think it would qualify? 

Appreciate any information you can provide. 

Thank you

[qbteachmt]

The IRS knows:

https://www.irs.gov/newsroom/qualified-charitable-distributions-allow-eligible-ira-owners-up-to-1000...

"They can inform their IRA administrator to make the contribution directly to the charity."

Have to. Not a Can, but a Must.

"Can they consider this amount as their RMD?"

Yes: https://www.irs.gov/newsroom/reminder-to-ira-owners-age-70-and-a-half-or-over-qualified-charitable-d...

"If so, I believe the amount would be excluded from their taxable income."

Yes.

"Can the OCD be considered a charitable contribution, allowing them to itemize?"

No. It would typically be reportable income and then offset by that deduction. A QCD already excludes the distribution from being reported as income. Can't double-dip it.

[qbteachmt]

Oh: check their ages for the tax year you are asking about, for purposes of the RMD and QCD, since everything is a moving target right now.

[JRC]

See Below:

Because they are not required a RMD, But are age 70.5 they can make a QCD.

Because it is not taxable you can not Itemize the QCD.

https://www.irs.gov/newsroom/qualified-charitable-distributions-allow-eligible-ira-owners-up-to-1000...

[GodFather]

Safe to assume these non-taxable distributions will have no impact at all on Social Security earnings, correct?

[IRonMaN]

Correct.

[GodFather]

Client contacted his IRA administrator, who informed him it would be coded as a "Normal Distribution", assuming code 7.  Client informed them it would be a QCD, they again stated it would be a normal distribution.  Obviously, this is contrary to the discussion within this post and appears to be an incorrect handling of the distribution.  I could see it being listed as a Code 7 if the funds were disbursed to my client, but if they are going directly to the charity, it should not be a taxable distribution.  Thoughts please. 

[IRonMaN]

They will show it as taxable but your client’s investment guru should be able to provide you with documentation to keep for your files showing it was a QCD.

[JRC]

You still enter the full amounts of the Distribution in the Worksheets as a normal distribution. But within the worksheet there is a place to enter the amount of "Qualified Charitable Distribution" $$$ which will be noted "QCD" on the Form 1040 and Line 4A,B  to reduce the Taxable amount.

[qbteachmt]

"would be coded as a "Normal Distribution", assuming code 7"

That's fine. A 1099-R is issued by the account agent for the money Out. Many times, they don't relate to what is happening with that money, even if they sent the payment or cut the check payable to the charity (which is required for QCD).

In tax prep, you will do your due diligence and code the 1099-R worksheet appropriate to the reality of what happened.

[GodFather]

Appreciate everyone's feedback.  

Completing the worksheets will result in the "normal distribution, Code 7" not being taxable.  This "normal distribution" will not impact Social Security income nor will it impact future SS benefits, correct?

[IRonMaN]

Correct

[GodFather]

Thank you. 

[IRonMaN]

You betcha!