QCD Mechanics [Qualified Charitable Distribution]

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sport
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QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Thu Nov 10, 2016 10:51 am

This question has come up in two different threads, but has not been clearly resolved. IMO, it is important enough to have a thread of its own.

In those other threads, Fidelity is quoted as stating that a QCD can be made using a check drawn on a Fidelity account that is written by the shareholder. I have not seen such a statement from Vanguard. It has been my understanding that a QCD check must be written by the IRA trustee. Fidelity's opinion aside, what is the law on this?

IRS Publication 590-B states:
"A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax deductible contributions."

It seems the legality of using a check written by the investor hangs on the words "made directly by the trustee". Although IANAL, it seems that including the word "directly" means that the trustee must write the check.

What do the Boglehead experts say?

Parthenon
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Re: QCD Mechanics

Post by Parthenon » Thu Nov 10, 2016 11:43 am

You may want to check out this thread for some explanations. viewtopic.php?f=10&t=202913&newpost=3111018

Ed
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Sheepdog
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Re: QCD Mechanics

Post by Sheepdog » Thu Nov 10, 2016 11:59 am

My instruction from Vanguard which I have followed for 15 QCDs this year from my IRA (I do not have a personal representative at Vanguard.) is to contact a retirement specialist at Vanguard by telephone. I specify from which investment and IRA account I wish to make the distribution. I give the name of the charity and the amount of donation. I receive the check made out to the charity, but with my address on it. I then mail that check to the charity.
That is the only way which Vanguard will allow.
Last edited by Sheepdog on Thu Nov 10, 2016 12:03 pm, edited 2 times in total.
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Re: QCD Mechanics

Post by sport » Thu Nov 10, 2016 12:00 pm

Parthenon wrote:You may want to check out this thread for some explanations. viewtopic.php?f=10&t=202913&newpost=3111018

Ed
Ed,
Thanks for the link. I saw that thread. It was one that I was referring to. The information in that thread shows that Fidelity says the investor is allowed to write the check for a QCD if drawn on a Fidelity account. However, Fidelity is not the authority on this question. The IRS is the authority. IMO it is important to know if that method really complies with IRS regulations. It would not be good to find oneself in an IRS audit and use the excuse that "Well, Fidelity says it is allowed." So far, I have not seen anything else that says this is allowed.

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Re: QCD Mechanics

Post by sport » Thu Nov 10, 2016 12:02 pm

Sheepdog wrote:My instruction from Vanguard which I have followed for 15 QCDs this year from my IRA (I do not have a personal representative at Vanguard.) is to contact a retirement specialist at Vanguard by telephone. I specify from which investment and IRA account I wish to make the distribution. I give the name of the charity and the amount of donation. I receive the check made out to the charity, but with my address on it. I then mail that check to the charity.
Yes, this is certainly proper and I do the same. However, there would be advantages if I could write my own check, and do it in accordance with regulations.

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Re: QCD Mechanics

Post by Sheepdog » Thu Nov 10, 2016 12:06 pm

sport wrote:
Sheepdog wrote:My instruction from Vanguard which I have followed for 15 QCDs this year from my IRA (I do not have a personal representative at Vanguard.) is to contact a retirement specialist at Vanguard by telephone. I specify from which investment and IRA account I wish to make the distribution. I give the name of the charity and the amount of donation. I receive the check made out to the charity, but with my address on it. I then mail that check to the charity.
Yes, this is certainly proper and I do the same. However, there would be advantages if I could write my own check, and do it in accordance with regulations.
I just added an addition to my post which says that Vanguard will not allow any other way according to conversations with their representatives.
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Re: QCD Mechanics

Post by sport » Thu Nov 10, 2016 12:16 pm

Sheepdog wrote:
sport wrote:
Sheepdog wrote:My instruction from Vanguard which I have followed for 15 QCDs this year from my IRA (I do not have a personal representative at Vanguard.) is to contact a retirement specialist at Vanguard by telephone. I specify from which investment and IRA account I wish to make the distribution. I give the name of the charity and the amount of donation. I receive the check made out to the charity, but with my address on it. I then mail that check to the charity.
Yes, this is certainly proper and I do the same. However, there would be advantages if I could write my own check, and do it in accordance with regulations.
I just added an addition to my post which says that Vanguard will not allow any other way according to conversations with their representatives.
Well, it may not be up to Vanguard. For example, I believe I can have a money market fund in my IRA with check writing privileges. If so, I could just write checks to my charities.

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Re: QCD Mechanics

Post by Sheepdog » Thu Nov 10, 2016 12:46 pm

sport wrote: r example, I believe I can have a money market fund in my IRA with check writing privileges. If so, I could just write checks to my charities.
Okay, you can write a check, but how does Vanguard know that the check was made out to a verifiable charity? That has to be verified in order for Vanguard tocomplete your 1099s. If they are not able and willing to do that, how will you overcome that?
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Re: QCD Mechanics

Post by MathWizard » Thu Nov 10, 2016 12:51 pm

Shucks, I was wondering how someone could apply Quantum Mechanics in portfolio analysis.
To me, QCD = Quantum Chromo Dynamics

MonteCarlo simulations are used in portfolio analysis now, but the first meaningful Monte Carlo use of them
that I know of were in atomic physics during the Manhattan Project

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Re: QCD Mechanics

Post by sport » Thu Nov 10, 2016 1:03 pm

Sheepdog wrote:
sport wrote: r example, I believe I can have a money market fund in my IRA with check writing privileges. If so, I could just write checks to my charities.
Okay, you can write a check, but how does Vanguard know that the check was made out to a verifiable charity? That has to be verified in order for Vanguard tocomplete your 1099s. If they are not able and willing to do that, how will you overcome that?
Vanguard does not care about the charity. The 1099 shows QCD's as ordinary taxable distributions. It only becomes non-taxable when you fill out your tax forms. On the line for IRA distributions, you enter the total amount first, but only the taxable amount in the space that gets totaled. You write QCD on that line to explain the difference.

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Re: QCD Mechanics

Post by RudyS » Thu Nov 10, 2016 1:08 pm

Sheepdog wrote:
sport wrote: r example, I believe I can have a money market fund in my IRA with check writing privileges. If so, I could just write checks to my charities.
Okay, you can write a check, but how does Vanguard know that the check was made out to a verifiable charity? That has to be verified in order for Vanguard tocomplete your 1099s. If they are not able and willing to do that, how will you overcome that?
I don't see in the IRS description of a QCD that the trustee has to make that verification. The requirement is that the money goes directly from the trustee to the charity without passing through the hands of the donor. If I write a check on my IRA MM account, with the charity as the payee, then it goes through the banking system as a payment FROM Vanguard TO the charity. I never see the money nor do I have control over it.; To me, that check is no more and no less than an order to VG to send money to the charity, same as if I make a distribution request in another form. That is the position that Fidelity has taken by suggesting that this is kosher. If I ever get audited, I'll just have to have that discussion. It is up to me to make sure I've selected a 501C3 organization, and that I get a receipt, etc. As for the 1099, VG reports the total distribution, I specify the QCD portion on my 1040.

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Re: QCD Mechanics

Post by sport » Thu Nov 10, 2016 4:48 pm

So far, in this thread, no one has provided any documentation (other than Fidelity's opinion) that a QCD check is allowed to be written by the investor. Any of us can have an opinion. However, it is the IRS interpretation of the rules that governs.

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Re: QCD Mechanics

Post by celia » Thu Nov 10, 2016 5:00 pm

I would not even WANT TO write checks on my IRA Money Market account. As I get older, I may get confused and mix up my checkbooks. Or it could be lost/stolen and someone else might make withdrawals for me. :(

Please keep my IRA locked up for me, Vanguard. I'll call you if I want to make a QCD.

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Re: QCD Mechanics

Post by RudyS » Thu Nov 10, 2016 8:58 pm

sport wrote:So far, in this thread, no one has provided any documentation (other than Fidelity's opinion) that a QCD check is allowed to be written by the investor. Any of us can have an opinion. However, it is the IRS interpretation of the rules that governs.
True, and I keep looking at this thread in hopes that someone found a specificreference to such an interpretation. Meanwhile I plan to go ahead and take my chances on an audit, should there ever be one.

The closest I have been able find is this, in Pub 590B:

"Qualified charitable distributions. A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax deductible contributions. You must be at least age 70½ when the distribution was made. Also, you must have the same type of acknowledgment of your contribution that you would need to claim a deduction for charitable contribution. See Records To Keep in Pub. 526."

Since the check I write on my IRA MM fund is only an order to pay the amount to the recipient, I am viewing this as equivalent to any other format of providing those instructions to the trustee.

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Re: QCD Mechanics

Post by sport » Thu Nov 10, 2016 9:56 pm

RudyS wrote:
sport wrote:So far, in this thread, no one has provided any documentation (other than Fidelity's opinion) that a QCD check is allowed to be written by the investor. Any of us can have an opinion. However, it is the IRS interpretation of the rules that governs.
True, and I keep looking at this thread in hopes that someone found a specificreference to such an interpretation. Meanwhile I plan to go ahead and take my chances on an audit, should there ever be one.

The closest I have been able find is this, in Pub 590B:

"Qualified charitable distributions. A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax deductible contributions. You must be at least age 70½ when the distribution was made. Also, you must have the same type of acknowledgment of your contribution that you would need to claim a deduction for charitable contribution. See Records To Keep in Pub. 526."

Since the check I write on my IRA MM fund is only an order to pay the amount to the recipient, I am viewing this as equivalent to any other format of providing those instructions to the trustee.
I hope you are correct. I still have a problem with the wording "made directly by the trustee". An MM check seems less "direct" than a Vanguard check.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by LadyGeek » Thu Nov 10, 2016 10:14 pm

I retitled the thread to help with the acronym.

The wiki has some background info: Qualified charitable distributions

Check the referenced article: Rules And Requirements For Doing A Qualified Charitable Distribution (QCD) From An IRA, then scroll to the bottom section "How To Do A Qualified Charitable Distribution (QCD)".

The answer to sport's question, which makes sense when comparing to the IRS publication (but read the entire article):
...Submit a distribution form to the IRA custodian, requesting that the check be made payable directly to the charity.
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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by Minot » Fri Nov 11, 2016 1:54 am

For what it may or may not be worth: I have twice been told by Vanguard retirement specialists that writing my check on my IRA account to the charity is a valid QCD. Kiplinger's article agrees: "If you have check-writing privileges for your IRA, you can write a check to the charity."

I've written half my planned donation checks today and will do the rest tomorrow and put them in the mail.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by Sheepdog » Fri Nov 11, 2016 3:48 am

Minot wrote:For what it may or may not be worth: I have twice been told by Vanguard retirement specialists that writing my check on my IRA account to the charity is a valid QCD. Kiplinger's article agrees: "If you have check-writing privileges for your IRA, you can write a check to the charity."

I've written half my planned donation checks today and will do the rest tomorrow and put them in the mail.
Excellent, Thank you. I am going to work with Vanguard to get check writing from my IRA. It will save me time (and Vanguard also, I would believe.) However, checks must be for $250 or more and I do write a bunch for less than that amount. Too bad that they can't be for less.
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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Fri Nov 11, 2016 11:19 am

Sheepdog wrote:
Minot wrote:For what it may or may not be worth: I have twice been told by Vanguard retirement specialists that writing my check on my IRA account to the charity is a valid QCD. Kiplinger's article agrees: "If you have check-writing privileges for your IRA, you can write a check to the charity."

I've written half my planned donation checks today and will do the rest tomorrow and put them in the mail.
Excellent, Thank you. I am going to work with Vanguard to get check writing from my IRA. It will save me time (and Vanguard also, I would believe.) However, checks must be for $250 or more and I do write a bunch for less than that amount. Too bad that they can't be for less.
It is interesting that Fidelity, Kiplinger, and apparently Vanguard, say that this is allowed. However, the wording in the IRS regulations is less clear. I am still afraid to risk such donations being disallowed.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by Minot » Fri Nov 11, 2016 12:44 pm

Sheepdog wrote:
Minot wrote:For what it may or may not be worth: I have twice been told by Vanguard retirement specialists that writing my check on my IRA account to the charity is a valid QCD. Kiplinger's article agrees: "If you have check-writing privileges for your IRA, you can write a check to the charity."

I've written half my planned donation checks today and will do the rest tomorrow and put them in the mail.
Excellent, Thank you. I am going to work with Vanguard to get check writing from my IRA. It will save me time (and Vanguard also, I would believe.) However, checks must be for $250 or more and I do write a bunch for less than that amount. Too bad that they can't be for less.
You're welcome, Sheepdog.

I have the same issue with smaller donations. I'm thinking about scheduling some of those for every 2nd or 3rd year. Or maybe consider moving my IRA to Fidelity--I did a fairly quick investigation and didn't find any mention of check amount limitations.

Off topic: your avatar always makes me smile.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by Alan S. » Fri Nov 11, 2016 10:43 pm

The IRA custodians indicating that check writing qualifies is probably based on Q&A 41 in Notice 2007-7:
Q-41. Is a check from an IRA made payable to a charitable organization described in § 408(d)(8) and delivered by the IRA owner to the charitable organization a direct payment to such organization?

A-41. Yes. If a check from an IRA is made payable to a charitable organization described in § 408(d)(8) and delivered by the IRA owner to the charitable organization, the payment to the charitable organization will be considered a direct payment by the IRA trustee to the charitable organization for purposes of § 408(d)(8)(B)(i).
Check writing conforms to the above answer. Large IRA custodians also have hot lines direct to the IRS and they probably confirmed their interpretation directly with the IRS before making public pronouncements based simply on their interpretation of the above.

That said, I would check with the custodian to determine what they record as the distribution date for one of these checks. How do they know when you mailed it? If they were to use the date they received the cancelled check and it was in the following year, then the 1099R would fall short of your RMD amount. Check with your individual custodian as their response should affect the final date in the year you would send out a QCD check you generated.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Fri Nov 11, 2016 11:13 pm

Alan,
Thank you for the detailed response. In the quote you posted, it talks about "a check from an IRA". It does not say who is allowed to write that check. There are two kinds of those checks. One is written by the custodian and one is written by the account holder. The quote does not address this difference.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by Alan S. » Sat Nov 12, 2016 8:03 pm

sport wrote:Alan,
Thank you for the detailed response. In the quote you posted, it talks about "a check from an IRA". It does not say who is allowed to write that check. There are two kinds of those checks. One is written by the custodian and one is written by the account holder. The quote does not address this difference.
That suggests to me that there is no difference. If there were, the IRS missed a clear chance to indicate as such in the answer to Q 41. I am pretty sure that the institutions probably did not lean exclusively on this QA, but contacted the IRS specifically to make sure that they contemplated IRA owner checks in that QA.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Sat Nov 12, 2016 8:25 pm

Alan S. wrote:
sport wrote:Alan,
Thank you for the detailed response. In the quote you posted, it talks about "a check from an IRA". It does not say who is allowed to write that check. There are two kinds of those checks. One is written by the custodian and one is written by the account holder. The quote does not address this difference.
That suggests to me that there is no difference. If there were, the IRS missed a clear chance to indicate as such in the answer to Q 41. I am pretty sure that the institutions probably did not lean exclusively on this QA, but contacted the IRS specifically to make sure that they contemplated IRA owner checks in that QA.
Alan, I understand what you are saying and most likely it is exactly correct. However, your use of the work "suggests" is where I am uncomfortable. You indicate that the IRS missed a chance to indicate that there is a difference if that difference existed. On the other hand, they missed an chance to say that there is no difference.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Wed Jan 24, 2018 5:18 pm

I am reviving this old thread to ask if there is any later information related to the original question: Is it permissible for a QCD to be made by the investor writing a check on a fund in the IRA account instead of asking the IRA custodian to write the check?

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by fourwheelcycle » Wed Jan 24, 2018 6:53 pm

My wife and I have a family joke about the answer to a question being "horizontal and unclear in the relevant range", which is an actual (and nonsensical) quote from a published econometrics article. I would say our family expression applies perfectly to this thread.

I will be turning 70 this year. I recently called called my Vanguard representative to say I had read it was possible to ask for checks on my IRA account and then write my own checks for QCDs. My representative consulted with the Vanguard section responsible for IRAs and told me Vanguard would not allow me to write the checks. Rather, I was told, I should submit a list of charities and amounts and Vanguard would mail the checks to me to forward to the charities.

I will be interested to follow this thread and see if other Vanguard customers have received recent and conflicting advice from Vanguard on this same question.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Wed Jan 24, 2018 8:34 pm

fourwheelcycle wrote:
Wed Jan 24, 2018 6:53 pm
My wife and I have a family joke about the answer to a question being "horizontal and unclear in the relevant range", which is an actual (and nonsensical) quote from a published econometrics article. I would say our family expression applies perfectly to this thread.

I will be turning 70 this year. I recently called called my Vanguard representative to say I had read it was possible to ask for checks on my IRA account and then write my own checks for QCDs. My representative consulted with the Vanguard section responsible for IRAs and told me Vanguard would not allow me to write the checks. Rather, I was told, I should submit a list of charities and amounts and Vanguard would mail the checks to me to forward to the charities.

I will be interested to follow this thread and see if other Vanguard customers have received recent and conflicting advice from Vanguard on this same question.
I asked Vanguard if it is possible to have check writing privileges on a fund in an IRA account and was told "yes". That being so, Vanguard would have no knowledge, nor would they care, to whom you wrote the check. All QCD withdrawals are treated by Vanguard as ordinary withdrawals. The QCD status is something you create on your tax return. It is your responsibility to meet the requirements for a QCD, not Vanguard's. IMO, Vanguard tells people they cannot do this to protect Vanguard from future claims in case the IRS disallows such check writing by the investor for QCD purposes.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by RudyS » Wed Jan 24, 2018 9:30 pm

I have been writing QCD checks on my Vanguard IRA since February of 2015. So far, so good. Vanguard has no idea what the checks are for. I make the QCD designation on my tax return. No questions yet from IRS to substantiate how I made the claimed QCD. I remain comfortable doing it this way.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Wed Jan 24, 2018 9:48 pm

The problem I have with Vanguard writing the checks is that I have no way of knowing whether or not the charity received the check. They are supposed to send a letter of acknowledgement, but those letters may not come until the following year, or they may not come at all. I had one instance where I made a donation in honor of someone else and asked for an acknowledgement to be sent to that person as well as to me. When no letters arrived, I followed up with the charity and they had no knowledge of my donation. I contacted Vanguard and they said the check had not been cashed. So, I had Vanguard send a replacement check and they stopped payment on the missing one. Conversely, if I write the check myself, I can see when the money comes out of my account as a withdrawal. I also had one instance where the Vanguard QCD check was sent to me, but it was delivered to my next door neighbor. There are just too many chances for things to go wrong when the custodian writes the check. If I write it, I have full visibility of the status of the contribution.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by Saving$ » Wed Jan 24, 2018 10:13 pm

sport wrote:
Wed Jan 24, 2018 9:48 pm
The problem I have with Vanguard writing the checks is that I have no way of knowing whether or not the charity received the check. They are supposed to send a letter of acknowledgement, but those letters may not come until the following year, or they may not come at all. I had one instance where I made a donation in honor of someone else and asked for an acknowledgement to be sent to that person as well as to me. When no letters arrived, I followed up with the charity and they had no knowledge of my donation. I contacted Vanguard and they said the check had not been cashed. So, I had Vanguard send a replacement check and they stopped payment on the missing one. Conversely, if I write the check myself, I can see when the money comes out of my account as a withdrawal. I also had one instance where the Vanguard QCD check was sent to me, but it was delivered to my next door neighbor. There are just too many chances for things to go wrong when the custodian writes the check. If I write it, I have full visibility of the status of the contribution.
You don't have to worry about that. With a QCD, Vanguard makes the check out to Sports Designated Charity, c/o Sport, Sports Address, Sports City, Sports State, Sport's Zip, so the check shows up at your house. Then you are responsible for getting the check to the charity, in whatever manner you choose. If mail is not coming to your house, that is a separate issue.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by Alan S. » Wed Jan 24, 2018 10:25 pm

RudyS wrote:
Wed Jan 24, 2018 9:30 pm
I have been writing QCD checks on my Vanguard IRA since February of 2015. So far, so good. Vanguard has no idea what the checks are for. I make the QCD designation on my tax return. No questions yet from IRS to substantiate how I made the claimed QCD. I remain comfortable doing it this way.
What happens if you write a check late in the year and it is not cashed by the charity before year end? How does Vanguard know of this IRA distribution in order to have your 1099R correct, or possibly your RMD correct? Or even your year end balance for next year's RMD calculation correct? If there is a procedure to address this pitfall, is it reliable?

Of course, most QCD checks are issued before the rest of the RMD is distributed, so many would be written early in the year. That would give you time to make sure all the checks have cleared and request stop payments if necessary. Perhaps you are just avoiding the late year cliffhangers.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by Pigeye Brewster » Wed Jan 24, 2018 10:49 pm

fourwheelcycle wrote:
Wed Jan 24, 2018 6:53 pm
I will be turning 70 this year. I recently called called my Vanguard representative to say I had read it was possible to ask for checks on my IRA account and then write my own checks for QCDs. My representative consulted with the Vanguard section responsible for IRAs and told me Vanguard would not allow me to write the checks. Rather, I was told, I should submit a list of charities and amounts and Vanguard would mail the checks to me to forward to the charities.
Please note that the required age is 70.5, not 70, and that you can't do a QCD until you actually are "officially" 70.5. In other words, if you attempt a QCD in June, but you don't turn 70.5 until August, it isn't a bona fide QCD.

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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Wed Jan 24, 2018 10:56 pm

Alan S. wrote:
Wed Jan 24, 2018 10:25 pm
RudyS wrote:
Wed Jan 24, 2018 9:30 pm
I have been writing QCD checks on my Vanguard IRA since February of 2015. So far, so good. Vanguard has no idea what the checks are for. I make the QCD designation on my tax return. No questions yet from IRS to substantiate how I made the claimed QCD. I remain comfortable doing it this way.
What happens if you write a check late in the year and it is not cashed by the charity before year end? How does Vanguard know of this IRA distribution in order to have your 1099R correct, or possibly your RMD correct? Or even your year end balance for next year's RMD calculation correct? If there is a procedure to address this pitfall, is it reliable?

Of course, most QCD checks are issued before the rest of the RMD is distributed, so many would be written early in the year. That would give you time to make sure all the checks have cleared and request stop payments if necessary. Perhaps you are just avoiding the late year cliffhangers.
That is a very important point, Alan. I plan on using this method, and I expect to have all of my larger donations completed before the end of September. That gives me time to resolve any problems. For the smaller donations, I cannot use this method anyway because Vanguard checks I can write must be for at least $250.

sport
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Location: Cleveland, OH

Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Wed Jan 24, 2018 11:00 pm

Saving$ wrote:
Wed Jan 24, 2018 10:13 pm
sport wrote:
Wed Jan 24, 2018 9:48 pm
The problem I have with Vanguard writing the checks is that I have no way of knowing whether or not the charity received the check. They are supposed to send a letter of acknowledgement, but those letters may not come until the following year, or they may not come at all. I had one instance where I made a donation in honor of someone else and asked for an acknowledgement to be sent to that person as well as to me. When no letters arrived, I followed up with the charity and they had no knowledge of my donation. I contacted Vanguard and they said the check had not been cashed. So, I had Vanguard send a replacement check and they stopped payment on the missing one. Conversely, if I write the check myself, I can see when the money comes out of my account as a withdrawal. I also had one instance where the Vanguard QCD check was sent to me, but it was delivered to my next door neighbor. There are just too many chances for things to go wrong when the custodian writes the check. If I write it, I have full visibility of the status of the contribution.
You don't have to worry about that. With a QCD, Vanguard makes the check out to Sports Designated Charity, c/o Sport, Sports Address, Sports City, Sports State, Sport's Zip, so the check shows up at your house. Then you are responsible for getting the check to the charity, in whatever manner you choose. If mail is not coming to your house, that is a separate issue.
Actually I do have to worry about that. If the charity does not receive the check I mail to them, or if they lose the check, my donation does not take place, even though the money is gone from my account. I cannot hand deliver a check to a charity hundreds of miles away. Getting credit for a QCD is great, but I also want the charity to get the money.

kaneohe
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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by kaneohe » Thu Jan 25, 2018 9:36 am

sport wrote:
Wed Jan 24, 2018 11:00 pm
Saving$ wrote:
Wed Jan 24, 2018 10:13 pm
sport wrote:
Wed Jan 24, 2018 9:48 pm
The problem I have with Vanguard writing the checks is that I have no way of knowing whether or not the charity received the check. They are supposed to send a letter of acknowledgement, but those letters may not come until the following year, or they may not come at all. I had one instance where I made a donation in honor of someone else and asked for an acknowledgement to be sent to that person as well as to me. When no letters arrived, I followed up with the charity and they had no knowledge of my donation. I contacted Vanguard and they said the check had not been cashed. So, I had Vanguard send a replacement check and they stopped payment on the missing one. Conversely, if I write the check myself, I can see when the money comes out of my account as a withdrawal. I also had one instance where the Vanguard QCD check was sent to me, but it was delivered to my next door neighbor. There are just too many chances for things to go wrong when the custodian writes the check. If I write it, I have full visibility of the status of the contribution.
You don't have to worry about that. With a QCD, Vanguard makes the check out to Sports Designated Charity, c/o Sport, Sports Address, Sports City, Sports State, Sport's Zip, so the check shows up at your house. Then you are responsible for getting the check to the charity, in whatever manner you choose. If mail is not coming to your house, that is a separate issue.
Actually I do have to worry about that. If the charity does not receive the check I mail to them, or if they lose the check, my donation does not take place, even though the money is gone from my account. I cannot hand deliver a check to a charity hundreds of miles away. Getting credit for a QCD is great, but I also want the charity to get the money.
As you noted above, even tho the $$$ are gone from your account, they are not gone from custodian's account so they could stop check and reissue it though the burden is on you to monitor and instruct. Last yr, I sent all checks at same time, got all but 1 acknowledgements within a month or so. The remaining one was not cashed for over 2 mos. and when I called custodian to check on status, they offered to reissue it.
I waited a bit longer and finally it was cashed but still no acknowledgement tho they have promised within 3 wks.

The situation is basically the same as if you wrote the check......you just have to depend on the custodian being the middleman and you doing all the monitoring work.

fourwheelcycle
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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by fourwheelcycle » Thu Jan 25, 2018 10:45 am

Pigeye Brewster wrote:
Wed Jan 24, 2018 10:49 pm
Please note that the required age is 70.5, not 70, and that you can't do a QCD until you actually are "officially" 70.5. In other words, if you attempt a QCD in June, but you don't turn 70.5 until August, it isn't a bona fide QCD.
I am aware of the IRS' age rule for a first QCD. In my post I should have said "I will be turning 70.5 this year".

fourwheelcycle
Posts: 488
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Re: QCD Mechanics [Qualified Charitable Distribution]

Post by fourwheelcycle » Thu Jan 25, 2018 12:43 pm

Alan S. wrote:
Wed Jan 24, 2018 10:25 pm
What happens if you write a check late in the year and it is not cashed by the charity before year end? How does Vanguard know of this IRA distribution in order to have your 1099R correct, or possibly your RMD correct? Or even your year end balance for next year's RMD calculation correct? If there is a procedure to address this pitfall, is it reliable?
I am going to have exactly this problem, since I won't turn 70.5 until early December, 2018. I realized this potential issue and asked my rep how Vanguard would handle it. My rep said if we coordinate carefully with Vanguard's IRA section they will issue the checks and mail them to me soon after I turn 70.5, with several weeks left in the tax year. Since the QCDs would also be my first RMD, it will be important to me for Vanguard to properly report both my RMD and my total QCDs for 2018. I am not sure on my recollection, but I think my rep may have said Vanguard would consider the date the checks were issued as the date of my qualified charitable donations.

I have looked for a clear statement of the IRS' rule on when a charitable donation by check is actually completed, e.g, when it is issued, mailed, received, or cashed? I have found multiple acceptable forms of evidence, including a bank record, which would show both the date the check was written and the date it was cashed, a pay stub that shows the date an employer withheld a wage amount, which would not show the date the employer issued a check or the date the check was received or cashed, and a written receipt from the charity which shows the date and amount of the contribution. It seems to me the final item may be the best one to rely on.

As it turns out, we dated and mailed our 2018 church pledge check on December 22, 2017. We knew the church secretary would probably not even open the church's mail until the first week in January, and we were wondering what date she would put on our receipt. When we received our year end church statement the line item said "Prepayment of 2018 Pledge" with the date and check number of our our pledge check.

Based on our experience with our church, I am wondering if it would be reasonable to include a cover letter with each of my late 2018 QCD checks requesting that the donation receipt should indicate the date of Vanguard's check. I have never been audited during the forty-five years I have filed taxes, so I imagine I may never need to show the actual receipts.

sport
Posts: 7523
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Thu Jan 25, 2018 1:47 pm

fourwheelcycle wrote:
Thu Jan 25, 2018 12:43 pm
Alan S. wrote:
Wed Jan 24, 2018 10:25 pm
What happens if you write a check late in the year and it is not cashed by the charity before year end? How does Vanguard know of this IRA distribution in order to have your 1099R correct, or possibly your RMD correct? Or even your year end balance for next year's RMD calculation correct? If there is a procedure to address this pitfall, is it reliable?
I am going to have exactly this problem, since I won't turn 70.5 until early December, 2018. I realized this potential issue and asked my rep how Vanguard would handle it. My rep said if we coordinate carefully with Vanguard's IRA section they will issue the checks and mail them to me soon after I turn 70.5, with several weeks left in the tax year. Since the QCDs would also be my first RMD, it will be important to me for Vanguard to properly report both my RMD and my total QCDs for 2018. I am not sure on my recollection, but I think my rep may have said Vanguard would consider the date the checks were issued as the date of my qualified charitable donations.

I have looked for a clear statement of the IRS' rule on when a charitable donation by check is actually completed, e.g, when it is issued, mailed, received, or cashed? I have found multiple acceptable forms of evidence, including a bank record, which would show both the date the check was written and the date it was cashed, a pay stub that shows the date an employer withheld a wage amount, which would not show the date the employer issued a check or the date the check was received or cashed, and a written receipt from the charity which shows the date and amount of the contribution. It seems to me the final item may be the best one to rely on.

As it turns out, we dated and mailed our 2018 church pledge check on December 22, 2017. We knew the church secretary would probably not even open the church's mail until the first week in January, and we were wondering what date she would put on our receipt. When we received our year end church statement the line item said "Prepayment of 2018 Pledge" with the date and check number of our our pledge check.

Based on our experience with our church, I am wondering if it would be reasonable to include a cover letter with each of my late 2018 QCD checks requesting that the donation receipt should indicate the date of Vanguard's check. I have never been audited during the forty-five years I have filed taxes, so I imagine I may never need to show the actual receipts.
A QCD is an ordinary withdrawal as far as Vanguard is concerned. So, if you have V write the check in 2017, it becomes part of your 2017 RMD regardless of when the charity receives or cashes the check. The charity is obligated to send you a letter of acknowledgement. However, the money was withdrawn from your account in 2017 and is part of your 2017 RMD regardless of the date the charity acknowledges. So, it does not seem to be a problem

fourwheelcycle
Posts: 488
Joined: Sun May 25, 2014 5:55 pm

Re: QCD Mechanics [Qualified Charitable Distribution]

Post by fourwheelcycle » Thu Jan 25, 2018 2:18 pm

sport wrote:
Thu Jan 25, 2018 1:47 pm
A QCD is an ordinary withdrawal as far as Vanguard is concerned. So, if you have V write the check in 2017, it becomes part of your 2017 RMD regardless of when the charity receives or cashes the check. The charity is obligated to send you a letter of acknowledgement. However, the money was withdrawn from your account in 2017 and is part of your 2017 RMD regardless of the date the charity acknowledges. So, it does not seem to be a problem
Thanks sport. Does this mean a QCD via a check written by Vanguard is similar to an employer wage withholding for a charitable donation, that is, the IRS will accept the date of the withdrawal even if the charity gives me a donation receipt that cites a different date?

sport
Posts: 7523
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: QCD Mechanics [Qualified Charitable Distribution]

Post by sport » Thu Jan 25, 2018 2:32 pm

fourwheelcycle wrote:
Thu Jan 25, 2018 2:18 pm
sport wrote:
Thu Jan 25, 2018 1:47 pm
A QCD is an ordinary withdrawal as far as Vanguard is concerned. So, if you have V write the check in 2017, it becomes part of your 2017 RMD regardless of when the charity receives or cashes the check. The charity is obligated to send you a letter of acknowledgement. However, the money was withdrawn from your account in 2017 and is part of your 2017 RMD regardless of the date the charity acknowledges. So, it does not seem to be a problem
Thanks sport. Does this mean a QCD via a check written by Vanguard is similar to an employer wage withholding for a charitable donation, that is, the IRS will accept the date of the withdrawal even if the charity gives me a donation receipt that cites a different date?
The way I see it is the check is part of your RMD for the year it is written. If it meets all the requirements for a QCD, then it is a QCD for that year. It cannot be for the next year because you may not have even made any withdrawals for the new year. On the other hand, if you write the check, then Vanguard would not be aware of the check until it is cashed. That is a different situation because the money would be withdrawn from your account when the check is cashed.

Pigeye Brewster
Posts: 240
Joined: Thu Oct 05, 2017 7:33 pm

Re: QCD Mechanics [Qualified Charitable Distribution]

Post by Pigeye Brewster » Thu Jan 25, 2018 2:47 pm

fourwheelcycle wrote:
Thu Jan 25, 2018 10:45 am
Pigeye Brewster wrote:
Wed Jan 24, 2018 10:49 pm
Please note that the required age is 70.5, not 70, and that you can't do a QCD until you actually are "officially" 70.5. In other words, if you attempt a QCD in June, but you don't turn 70.5 until August, it isn't a bona fide QCD.
I am aware of the IRS' age rule for a first QCD. In my post I should have said "I will be turning 70.5 this year".
Good deal. Just wanted to be sure. Sounds like you're good to go. :beer

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