jsl11 wrote:Well, there could be a negative consequence. If someone had appreciated securities in their taxable account, they may choose to donate the securities if the direct IRA non-taxable distribution could not be made. However, if a non-taxable distribution could be part of their RMD, the non-taxable distribution would be preferable.
The work-around to that problem is easy: Donate from IRA just in case there is a retroactive law and
donate from taxable account, too. I don't see any negative consequences at all.
Basically, that is correct but there have been some reports of certain custodians refusing to do a QCD until Congress authorizes it. If the custodian will do the transfer AND you are subject to RMDs, note that you cannot have taken any earlier distribution in 2012 or the earlier distribution would be the RMD. The transfer to a charity would be treated as follows if your RMD has already been completed:
1) If the QCD is retroactively extended, the transfer to charity will be tax free and not increase your AGI, but you will still have your earlier taxable RMD to report.
2) If QCD expired, the transfer would obviously not be a QCD but would be treated as if it was distributed to you and you then made a charitable contribution from taxable. The transfer would be included in your AGI, could increase SS taxation and if you cannot fully itemize the contribution, your taxable income would be higher.
The past two times the QCD was due to expire, Congress extended it retroactively, and for 2010 you were allowed to make your 2010 QCD through Jan, 2011. Note that there is no special 1099R reporting for a QCD. The taxpayer reports it like a rollover on line 15b.
But the real question now is whether you would NOT take your 2012 RMD, waiting for Congress to repeat the 2010 fiasco. My guess is that if you did not take your RMD, waiting for the QCD and it actually expired, that if you promptly take your 2012 RMD after year end, the IRS would waive the penalty. But you would still have two RMDs taxable in 2013. This "retroactive tax administration" by Congress is causing fits for all taxpayers who do any tax planning, and you can believe that the IRS is pretty hot about Congress' daliance as well. This time a record number of provisions are expiring, and it's possible that if the dysfunction does not end very soon, the 2012 tax filing season will have to be extended beyond 4/15.