 Internal Revenue Service IRS tax news reminder to Ira IRA owners age 70 and a half or over Qualified charitable distributions are great options for making tax-free gifts to charity Honestly, isn't it funny how even the IRS is like yeah, if you want your money to actually help people for goodness sake Don't give it to us unless we make you And it's like but wait a second IRS aren't you a charity too I mean the government deals with like social security medicare and all kinds of social programs If you're like a charity helping people out. Why aren't you advising us to give our charitable contributions to you? And the IRS is like yeah, but we're so inefficient. It's ridiculous. I mean For example just last year. We've spent five trillion dollars Ain't only probing a rare species of bat to find the cure to kovat Only to later find out the bats were actually just rats with wings stapled to their backs Apparently part of some guys halloween decorations Yeah, I mean seriously best to give the money to charity if you can I mean honestly like given the money to us is basically equivalent to stuffing the money directly up hunter biden's nose Which while entertaining is not actually charity really any case First to joke the IRS auditor actually told me cleanliness is next to godliness Remember cleanliness is next to godliness. So make it kind of clean, but not too much Amanda more ambiguous on the dusting and I was like well, yeah, maybe But I'd rather try to emulate god himself rather than some super clean dude that just happened to be sitting next to him Look at you guys. No offense fry, but you've become a fat sack of crap sack and bender Your beer belly's so big your door won't even close And that doesn't even make sense. Come on. You know what I mean like honestly like What if god happened to be judging some super clean freak murderer dude that day like dexter or something If there is some mental health foundation that raised money for people like you, please Be sure to let me know. So the super clean murderer dude just happened to be next to god Just before god spotted the snooper clean murderer dude casting him into the fiery pits of hell I'm gonna regret this the rest of your life both seconds The rubbing alcohol hand sanitizer the clean freak bathed in every 15 minutes firsting into a ball of flames on the way down Like I I don't want to emulate that guy IR 2022-201 November 17 2022 Washington the internal revenue service today reminded ira ira Owners age 70 and a half or over of their option to transfer up to $100,000 to charity tax free Each year these transfers known as qualified charitable distributions or qcd's Offer eligible older americans a great way to easily give to charity before the end of the year Moreover for those who are at least 72 qcd's count toward the ira Owners required minimum distribution the rmd for the year So let's first take a step back with this ira and think about the ira in general The required minimum distributions and how the charitable contributions might fit into this So usually when we're putting money into an ira note that the ira is not like the only Investment tool you can put money in in order to save for retirement We could put money just into stocks and bonds for example We usually put money under some kind of an umbrella of a retirement type of account Because uh, we're going to get a tax benefit at the point in time that we put the money in to something like an ira We're usually going to be paying less taxes at that point In time and then the earnings are going to be deferred in terms of the taxes as well That's why we do it and so then the ira is is so now our money's been restricted to us But we also got that tax benefit side of things. So there's a pro and con to it then at some point Towards retirement and retirement age Maybe we don't even need the money that's in the ira and we know that if I pull the money out of the ira It's going to cause me tax problems possibly because I'm going to have to pay taxes on it when I pull the money out Because it's a deferral. I didn't pay taxes when I put the money in So then at some point in time the government's going to actually force us to take the money out Those are the required minimum distributions They do so in order to Get their piece of the money because it's been deferred up until that point in time Now they want to be collecting the tax on it So they want to require people to pull it out at some point So then the question is well if I'm going to if I'm going to pull the money out Is there some way that I can get a tax benefit? By giving the money to charity or something like that and that's one place where you can think of The charitable contributions the qcd's The qualified charitable distributions that could come into play in kind of conjunction With your ira. So that's the general idea. Okay. So how to set up a qcd So any ira owner who wishes to make a qcd for 2022 should contact their ira trustee soon So that the trustee will have time to complete the transaction before the end of the year Now we're talking about cashed based transactions typically here So if you want to do this kind of activity You've got to plan for it and do it now because we're rolling up, of course on the end of the year So normally distributions from a traditional individual retirement arrangement an ira are taxable when received With a qcd. However, these distributions become tax-free So long as they're paid directly from the ira to an eligible charitable organization qcd's can be can be made electronically directly to the charity or by check payable to the charity An ira distribution such as an electronic payment made directly to the ira owner does not count as a qcd Likewise a check made payable to the ira owner is not a qcd Each year an ira Owner age 70 and a half or over can exclude from gross income up to $100,000 of these qcds Right. So obviously for taxes income is bad If you've got to pull money out of the ira and if you have to include it in income That would not be good if you cannot include it in income possibly by having a contribution to an ira That would of course, uh, generally be good notice that if you had if If you were to just count it as income and then deduct it as you normally get a deduction for the ira It would be on a schedule a which you get a lot less of a benefit from possibly Due to the fact that you might not be standardizing Uh, and you might not even have access really to the to the deduction there. So So it's a little bit different, but anyways you could I won't get into the detail So for a married couple If both spouses are age 70 and a half or over and both have iras each spouse can exclude up to 100,000 for a total of Up to $200,000 per year the qcd option is available regardless of whether an eligible ira owner itemizes deductions on schedule a So schedule a again is the normal place where you would take, uh charitable contributions Although there's like a 300 dollar amount, uh, if you're not Schedule a transfer amounts are not taxable and no deduction is available for the transfer Uh report currently a 2022 qcd must be reported on the 2022 federal income tax return Normally filed during the 2023 tax year filing season. So clearly 2022 is coming to an end We've got to do the reporting generally by april 15 2023 for the 2022 tax year So in early 2023 the ira owner will receive form 1099 r There's a link to that here from the ira trustee. So usually a 1099 r would show the distribution You want to make sure that if you have a distribution that's not going to be subject to tax That you have set it up properly so that they have the proper code in the 1099 r to indicate You know the type of transfer it was so trustee that shows an ira distribution made during the calendar year for 2022 including both regular distributions and qcds the total distribution is in box one on that form There's no special code for a qcd So like other ira distribution qcds are shown online form line for a form 1040 or form 1040 s r There's links to that here if part or all of an ira distribution is a qcd Enter the total amount of the ira distribution in line for a this is the amount shown in box one on form 1099 r Then if the full amount of the distribution is a qcd enter zero online for b So in essence, you're still going to be reporting what was showing on the 1099 But i believe for b is going to be the taxable amount So if it wasn't taxable because it was a qualified qcd Then you would have zero on that line and again you want to make sure that you're talking to That the issuer of the 1099 to make sure that everything Is on board in the event that the iras has questions about about it or audits it in some way So if only part of the qcd the remaining taxable portion is normally entered online for b either way Be sure to enter a qcd Next to line for b our further details will be in the final instructions to the 2022 form 1040 So get a receipt qcds are not deductible as charitable contributions on schedule a but but as with deductible contributions The donor must get a written acknowledgement for contribution from the charitable organization before filing their tax return So notice what's happening here Is if the money comes out of the ira which you would have had to record as income But instead you're giving it directly to the charity Instead of getting a deduction for the contributions. You're getting a reduction of the income So what you cannot do is get a reduction of the income and Record it on schedule a that would be double dipping right then you'd be doing to you know, that'd be double dipping Uh, but so even though you've reduced you're kind of doing a similar thing Although it's probably a bigger benefit to reduce the income oftentimes because again the schedule a could have issues It could be phasing out if you're high income. You might not have a schedule in a if you're low income and so And so but you still need to back up and support the amount that's going to the charity With the information in the event that you get audited for that So in general the acknowledgement must state the date and amount of the contribution And indicate whether the donor received anything of value in return For details see the acknowledgement section in publication 526 available on irs.gov There's a link to that here for more information about ira distributions and qcd's see publication 590 b Also available on irs.gov. There's a link to that here. There's links to all the stuff I said there was a link to here. There'll be a link to this in the description