RMD timing and documentation

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Peter Foley
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RMD timing and documentation

Post by Peter Foley »

I have read both the BH Wiki and Kitce’s referenced 2020 article on changes to RMD’s as a result of the SECURE Act. IRS publications were not particularly helpful either.

The situation is a bit complex, but not unusual. An individual has two retirement accounts, an IRA and a 401k (403b/457b).
The individual is approaching age 72 and wishes to start withdrawals with the intention of withdrawing the RMD amount from the 401k, and making Qualified Charitable Contributions (QCD’s) from the IRA to satisfy the year’s RMD requirement.
The individual turns 72 on December 1, 2022. However, the charities’ main expenses are during the summer months.

Questions:
Can the individual make QCD’s from the IRA to the charities in April of that year and have them qualify as RMDs as well? Can the individual make withdrawals from the 401k account in January of that year and satisfy the RMD requirement for that year? Or, does everything have to start after December 1st?
If early in the year withdrawals and contribution are allowed and satisfy the RMD requirements, what documentation does the IRS require as proof?
IRS references would be greatly appreciated.
sport
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Re: RMD timing and documentation

Post by sport »

You can take RMDs any time during the year you turn 72. If you want your QCDs (from your IRA) to be part of your RMD, you must make the QCDs before you complete your RMD. There is no documentation for your RMD other than the 1099R that shows your distribution total for the year. The proof for QCDs is a letter of acknowledgment from the charity(s).
jebmke
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Re: RMD timing and documentation

Post by jebmke »

One of the better IRS documents on IRA distributions is Publication 590B. Pretty comprehensive.
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Peter Foley
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Re: RMD timing and documentation

Post by Peter Foley »

Thanks sport. Any time during the year is what thought I understood from the Kitce's article. I'm aware you must take QCD's first and they can only be from IRAs.

What I have read is silent about taking RMDs from your 401k and then later taking QCD's from your IRA. The two actions are different because of the types of accounts so one does not get addressed in the context of the other.

Can you point to an IRS document that explains the "any time during the year" provision, or perhaps the law itself?

Edit: I'll look at 590B again. 590B states: "Distributions by the required beginning date. You must receive at least a minimum amount for each year starting with the year you reach age 72. If you don't receive that minimum distribution amount in the year you become age 72, you must receive that distribution by April 1 of the year following the year you become age 72."

Agreed - there is no mention that you need to start after you turn 72.
sport
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Re: RMD timing and documentation

Post by sport »

You do not have to make QCDs before you complete your RMD. However, if you make them after completing the RMD, they are in addition to your RMD, so they do not reduce your current year tax bill. They just reduce the size of your account.
eddot98
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Re: RMD timing and documentation

Post by eddot98 »

Are you talking about me? I turn 72 on December 1, 2022 and I am taking RMD’s next year from a Traditional IRA account and a 457b account. I am not doing QCD’s until some time after 2022.
What I was surprised to find out was that I had to take the RMD’s separately from the 2 accounts. Once I found that out, I just contacted each account servicer and asked them to set up the RMD’s to pay out monthly with the necessary taxes, federal and state, deducted from each payment.
chemocean
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Re: RMD timing and documentation

Post by chemocean »

sport wrote: Wed Nov 24, 2021 5:29 pm You do not have to make QCDs before you complete your RMD. However, if you make them after completing the RMD, they are in addition to your RMD, so they do not reduce your current year tax bill. They just reduce the size of your account.
Speaking of reducing the size of the account, you can also make QCDs when you turn 70.5, if you are charitably inclined.
By taking the QCDs in the 1 or 2 years (depends on your birthday) before RMDs, you reduce the account balance of the traditional IRA. You then can invest the donations that you would otherwise have made into a taxable account. In effect, This sequence is a tax-free withdrawal from traditional IRA .
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BL
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Re: RMD timing and documentation

Post by BL »

Back when RMDs were required at age 70 and QCDs could only be done after age 70.5, you might have run into a problem. But the QCD age didn't change, so there is no harm in doing them any time in the year you turn 72. As mentioned, you must consider the 401k RMD and IRA RMD separately and satisfy them separately. Any QCDs done before RMDs are completed will count as RMDs. Any done later will simply be non-taxable.

You will get a 1099 from your brokerage for money withdrawn from IRA (don't know exactly how the 401k works but I expect it is similar); on your tax return (1040) you will indicate QCD on that line item so QCD amount will not be taxable or part of your Adjusted Gross Income.
shess
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Re: RMD timing and documentation

Post by shess »

Peter Foley wrote: Wed Nov 24, 2021 5:21 pm What I have read is silent about taking RMDs from your 401k and then later taking QCD's from your IRA. The two actions are different because of the types of accounts so one does not get addressed in the context of the other.
To the best of my knowledge, RMDs from your 401k are entirely independent from RMDs (and thus QCDs) from your tIRA. Distributions from tIRA accounts do not satisfy RMD requirements in your 401k, nor does the opposite apply. In fact, I believe if you have multiple 401k accounts, each of them is independent on the topic of RMDs. Likewise for other variants like 403b and TSP.

On the flip side, all of your tIRA accounts (except inherited) are considered as a single account for purposes of taking RMDs. So you can take your entire tIRA RMD requirement from one of many tIRA accounts.

Put another way, I don't think there is any context to address, you can treat each account independently.
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