New 2020 RMD Rules

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Topic Author
marbles
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New 2020 RMD Rules

Post by marbles » Sun Jun 28, 2020 2:18 pm

A question on "IRS Notice 2020-51" "Waiver of 2020 Required Minimum Distributions"

The above Waiver, announced last week, June 23, 2020, allows for the owner of an IRA, who has taken his RMD for 2020, the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

The waiver states: "All distributions in 2020 from a Plan or IRA that were 2020 RMDs can be rolled over or put back into the Plan or IRA so long as that is completed by August 31, 2020."

Now the question. I have taken my full RMD distribution for 2020. However it was taken in the form of a "Qualified Charitable Deduction", a QCD. It has already been disbursed to the charity. Under this new IRS waiver, am I allowed to replace/roll the funds, back into the IRA, that were withdrawn for the purpose of the QCD to the charity???

Here's the link to the new Waiver.
https://www.irs.gov/pub/irs-drop/n-20-51.pdf

I have not found anything that says you cannot replace the funds but it does not specifically mention QCD's either.

Any thoughts or ideas would be appreciated.

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WoodSpinner
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Re: New 2020 RMD Rules

Post by WoodSpinner » Sun Jun 28, 2020 2:23 pm

OP,

You can return the full RMD amount and then take the QCD as a charitable deduction, assuming you will itemize. I recommend calling the brokerage directly since the ruling is so new and I suspect the online systems haven’t been updated yet.

Mark the deposit as a 2020 Rollover, Re: IRS Note 2020-51 ( at least that is what I am doing).

WoodSpinner

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cheese_breath
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Re: New 2020 RMD Rules

Post by cheese_breath » Sun Jun 28, 2020 2:46 pm

WoodSpinner wrote:
Sun Jun 28, 2020 2:23 pm
... take the QCD as a charitable deduction, assuming you will itemize....
You don't have to itemize in order to take advantage of QCDs. They're not deductions. They come right off your income whether you itemize or not.
The surest way to know the future is when it becomes the past.

Gill
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Re: New 2020 RMD Rules

Post by Gill » Sun Jun 28, 2020 3:06 pm

WoodSpinner wrote:
Sun Jun 28, 2020 2:23 pm
OP,

You can return the full RMD amount and then take the QCD as a charitable deduction, assuming you will itemize. I recommend calling the brokerage directly since the ruling is so new and I suspect the online systems haven’t been updated yet.

Mark the deposit as a 2020 Rollover, Re: IRS Note 2020-51 ( at least that is what I am doing).

WoodSpinner
I don't believe this is correct. Because there is no RMD for 2020, OP simply took a QCD from the IRA that happens to be equal to what would have been an RMD. The QCD's have been paid to the charities. I don't think he can do anything at this point. He will have a taxable distribution from the IRA with the QCD totally offsetting this resulting in no taxable effect.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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WoodSpinner
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Re: New 2020 RMD Rules

Post by WoodSpinner » Sun Jun 28, 2020 9:10 pm

Gill wrote:
Sun Jun 28, 2020 3:06 pm
WoodSpinner wrote:
Sun Jun 28, 2020 2:23 pm
OP,

You can return the full RMD amount and then take the QCD as a charitable deduction, assuming you will itemize. I recommend calling the brokerage directly since the ruling is so new and I suspect the online systems haven’t been updated yet.

Mark the deposit as a 2020 Rollover, Re: IRS Note 2020-51 ( at least that is what I am doing).

WoodSpinner
I don't believe this is correct. Because there is no RMD for 2020, OP simply took a QCD from the IRA that happens to be equal to what would have been an RMD. The QCD's have been paid to the charities. I don't think he can do anything at this point. He will have a taxable distribution from the IRA with the QCD totally offsetting this resulting in no taxable effect.
Gill
Gill,

I must be missing something ....

If he repays the RMD amount doesn’t the QCD just become a charitable deduction?

WoodSpinner

mailman781
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Re: New 2020 RMD Rules

Post by mailman781 » Sun Jun 28, 2020 9:31 pm

Gill wrote:
Sun Jun 28, 2020 3:06 pm
WoodSpinner wrote:
Sun Jun 28, 2020 2:23 pm
OP,

You can return the full RMD amount and then take the QCD as a charitable deduction, assuming you will itemize. I recommend calling the brokerage directly since the ruling is so new and I suspect the online systems haven’t been updated yet.

Mark the deposit as a 2020 Rollover, Re: IRS Note 2020-51 ( at least that is what I am doing).

WoodSpinner
I don't believe this is correct. Because there is no RMD for 2020, OP simply took a QCD from the IRA that happens to be equal to what would have been an RMD. The QCD's have been paid to the charities. I don't think he can do anything at this point. He will have a taxable distribution from the IRA with the QCD totally offsetting this resulting in no taxable effect.
Gill
I believe Gill is correct. He is not required to take a RMD in 2020, but he is allowed to make a withdrawal of any amount, and it would be taxable except that the withdrawal was in the form of a QCD, therefore making the withdrawal a non-taxable withdrawal. That is just my opinion. You should talk with the company you have the IRA with, or a tax person.

sport
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Re: New 2020 RMD Rules

Post by sport » Sun Jun 28, 2020 9:58 pm

QCDs are ordinary withdrawals from an IRA. They only become identified on the tax forms. Since QCDs are ordinary withdrawals, they should be able to be reversed. That would then make the donations deductions that could be itemized. There is nothing special about a QCD withdrawal. The 1099 Form always shows these as ordinary distributions. The IRA trustee does not know nor care whether or not your QCD actually meets the requirements for a QCD. You could try to make a QCD to an organization that is not qualified. Everything would happen the same way. The QCD determination is between you and the IRS.

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cheese_breath
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Re: New 2020 RMD Rules

Post by cheese_breath » Sun Jun 28, 2020 10:07 pm

WoodSpinner wrote:
Sun Jun 28, 2020 9:10 pm
Gill wrote:
Sun Jun 28, 2020 3:06 pm
WoodSpinner wrote:
Sun Jun 28, 2020 2:23 pm
OP,

You can return the full RMD amount and then take the QCD as a charitable deduction, assuming you will itemize. I recommend calling the brokerage directly since the ruling is so new and I suspect the online systems haven’t been updated yet.

Mark the deposit as a 2020 Rollover, Re: IRS Note 2020-51 ( at least that is what I am doing).

WoodSpinner
I don't believe this is correct. Because there is no RMD for 2020, OP simply took a QCD from the IRA that happens to be equal to what would have been an RMD. The QCD's have been paid to the charities. I don't think he can do anything at this point. He will have a taxable distribution from the IRA with the QCD totally offsetting this resulting in no taxable effect.
Gill
Gill,

I must be missing something ....

If he repays the RMD amount doesn’t the QCD just become a charitable deduction?

WoodSpinner
I see what you're getting at. If OP repays the withdrawal then it's just as though there was no withdrawal in the first place. He should NOT put the distribution back into the IRA.
The surest way to know the future is when it becomes the past.

Alan S.
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Re: New 2020 RMD Rules

Post by Alan S. » Sun Jun 28, 2020 11:33 pm

Yes, you could roll back the QCD amount (but not more than what the RMD would have been), then itemize the donation, and instead of reporting a QCD you would report a rollover and Sch A deductions.

You should already have itemized deductions at least equal to your standard deduction so that the donation could be fully itemized. You would then save on current year taxes since your taxable income would be reduced, but your future RMDs would be larger that they would have been with the QCD retained, since your IRA value has not been reduced for purposes of determining future RMDs. So this is somewhat the reverse of a 2020 QCD which does not affect 2020 taxable income, but DOES reduce the IRA balance and future RMDs in proportion.

You might consider whether how your 2020 marginal rate will compare to future years, with a higher 2020 marginal rate favoring the IRA rollback.

Gill
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Re: New 2020 RMD Rules

Post by Gill » Mon Jun 29, 2020 5:43 am

I stand corrected. I was speculating on the answer and Alan knows this subject far better than me. I’m still surprised at the answer.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Topic Author
marbles
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Re: New 2020 RMD Rules

Post by marbles » Mon Jun 29, 2020 3:15 pm

I want to thank everyone for the helpful advice. This seems to be a confusing topic. From what I take of all this, it seems that replacing the funds in the IRA is allowable. There are two options I could use when reporting the donation. I believe either option could be used.

1- Replace the funds, but keep the donation designated as a QCD.
2- Replace the funds, but treat the donation as a Charitable Donation, itemized on Schedule A.

I have assumed the following from my research and reading of the advice from posts here:

- "IRS Notice 2020-51" "Waiver of 2020 Required Minimum Distributions", allows for the owner of an IRA, who has taken his RMD for 2020, the opportunity to roll those funds back into a retirement account.

- The CARES Act has suspended RMDs for the year, you can still make a QCD to a charity of your choice as long as you are at least 70½ when you make the contribution.

- No reason that the distribution to the charity wouldn't still count as an QCD.
- QCDs are reported as a normal distribution on IRS Form 1099-R for any non-Inherited IRAs.
- QCDs are not limited to withdrawals from your RMD for the year.
- A QCD is treated as a normal withdrawal reported on 1099-R from the trustee.
- You report the total withdrawal on 1040, "Line 4A, IRA Distributations"
- On "Line 4B Taxable Amount", report as "0" and write in QCD.
- The QCD determination is between you and the IRS.

I have learned a lot. Hope my assumptions are correct and my correct understanding of what the experts say. Any other advice or thoughts would be appreciated. Thank you all.

Alan S.
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Re: New 2020 RMD Rules

Post by Alan S. » Mon Jun 29, 2020 3:41 pm

All correct, except for #1, which is not an option.

If you replace the funds via permitted rollover, then you cannot report a QCD. You would just report a distribution and rollover on line 4a,4b of Form 1040, not a QCD. The charity keeps the money as an ordinary non QCD donation, and you can claim an itemized deduction if you can itemize.

It is your choice whether to report a QCD (if you qualified therefore) or not, but if you roll the distribution back to the IRA (must be to the distributing IRA if you are utilizing 2020-51) you no longer can report a QCD even though the transaction was physically done as a QCD. It's all about how you report it on Form 1040, and it's the same 1099R and the same to the charity either way.

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cheese_breath
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Re: New 2020 RMD Rules

Post by cheese_breath » Mon Jun 29, 2020 3:41 pm

marbles wrote:
Mon Jun 29, 2020 3:15 pm
I want to thank everyone for the helpful advice. This seems to be a confusing topic. From what I take of all this, it seems that replacing the funds in the IRA is allowable. There are two options I could use when reporting the donation. I believe either option could be used.

1- Replace the funds, but keep the donation designated as a QCD.
2- Replace the funds, but treat the donation as a Charitable Donation, itemized on Schedule A.
As Alan S. notes, if you replace the funds you report it as a rollover. not a QCD.
Alan S. wrote:
Sun Jun 28, 2020 11:33 pm
Yes, you could roll back the QCD amount (but not more than what the RMD would have been), then itemize the donation, and instead of reporting a QCD you would report a rollover and Sch A deductions.
The surest way to know the future is when it becomes the past.

Topic Author
marbles
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Re: New 2020 RMD Rules

Post by marbles » Mon Jun 29, 2020 3:57 pm

Alan, i appreciate the info. Where I am still confused as to why I can not call the distribution a QCD?
If this statement is correct "QCDs are not limited to withdrawals from your RMD for the year".
I could take amount out of an IRA, not as a RMD and claim it as a QCD. Is that not correct?
This just happens to be 2020 and the amount equal to my RMD for the year.
What am I missing?

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cheese_breath
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Re: New 2020 RMD Rules

Post by cheese_breath » Mon Jun 29, 2020 4:12 pm

marbles wrote:
Mon Jun 29, 2020 3:57 pm
Alan, i appreciate the info. Where I am still confused as to why I can not call the distribution a QCD?
If this statement is correct "QCDs are not limited to withdrawals from your RMD for the year".
I could take amount out of an IRA, not as a RMD and claim it as a QCD. Is that not correct?
This just happens to be 2020 and the amount equal to my RMD for the year.
What am I missing?
I'm not Alan, but I'll take another crack at it. When you put the money back into the IRA it's no longer a distribution. It's a rollover. You can't have it both ways.
The surest way to know the future is when it becomes the past.

sport
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Re: New 2020 RMD Rules

Post by sport » Mon Jun 29, 2020 4:15 pm

marbles wrote:
Mon Jun 29, 2020 3:57 pm
Alan, i appreciate the info. Where I am still confused as to why I can not call the distribution a QCD?
If this statement is correct "QCDs are not limited to withdrawals from your RMD for the year".
I could take amount out of an IRA, not as a RMD and claim it as a QCD. Is that not correct?
This just happens to be 2020 and the amount equal to my RMD for the year.
What am I missing?
It is not a "Qualified Charitable Distribution" (QCD) because there is no distribution from the IRA if you put the money back.

Gill
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Re: New 2020 RMD Rules

Post by Gill » Mon Jun 29, 2020 5:56 pm

I’m still puzzled why this can be claimed as a charitable deduction. I guess the taxpayer by directing payment of his assets to charity has made a charitable gift regardless of the tax treatment of the distribution to him.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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cheese_breath
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Re: New 2020 RMD Rules

Post by cheese_breath » Mon Jun 29, 2020 6:18 pm

Gill wrote:
Mon Jun 29, 2020 5:56 pm
I’m still puzzled why this can be claimed as a charitable deduction. I guess the taxpayer by directing payment of his assets to charity has made a charitable gift regardless of the tax treatment of the distribution to him.
Gill
He's already given the money to the charity so the only question is whether it came from his IRA or taxable accounts. If he returns it to the IRA then it must be from his taxable accounts and can be deducted from his taxes (if he has enough other deductions to meet or exceed his standard deduction).
The surest way to know the future is when it becomes the past.

Topic Author
marbles
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Re: New 2020 RMD Rules

Post by marbles » Tue Jun 30, 2020 8:34 am

Thank you, I think I finally understand. If there is no withdrawal, there is no QCD.
Takes me awhile sometimes. Thanks for the patience.

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BolderBoy
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Re: New 2020 RMD Rules

Post by BolderBoy » Tue Jun 30, 2020 11:34 am

marbles wrote:
Tue Jun 30, 2020 8:34 am
If there is no withdrawal, there is no QCD.
And just to be explicit, if there is no IRA withdrawal, there is no QCD.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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