RMD Checks to Charity not posted till after Jan 1

[Retired]

For my 2016 RMD I sent checks directly from my Fidelity IRA to several charity's in Dec. but 3 of them were not posted until Jan. Because of this, my 1099R does not show my full RMD. How do I handle my 2016 taxes to account for this?

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[ira smilovitz]

On Friday, January 27, 2017 at 9:16:38 PM UTC-5, Retired wrote:
> For my 2016 RMD I sent checks directly from my Fidelity IRA to several charity's in Dec. but 3 of them were not posted until Jan. Because of this, my 1099R does not show my full RMD. How do I handle my 2016 taxes to account for this?
>
> --

The key date is when Fidelity issued the checks, not when the charity cashed it. If the issue date was very early in January, you may be able to show that Fidelity received your instructions with enough time to act in December. Usually, you can get relief from penalties if you can demonstrate that the failure to meet a requirement was due to reasonable cause. See the instructions for Form 5329.

Ira Smilovitz, EA

[Retired]

On Sunday, January 29, 2017 at 9:14:23 AM UTC-8, ira smilovitz wrote:
> On Friday, January 27, 2017 at 9:16:38 PM UTC-5, Retired wrote:
> > For my 2016 RMD I sent checks directly from my Fidelity IRA to several charity's in Dec. but 3 of them were not posted until Jan. Because of this, my 1099R does not show my full RMD. How do I handle my 2016 taxes to account for this?
> >
> > --
>
> The key date is when Fidelity issued the checks, not when the charity cashed it. If the issue date was very early in January, you may be able to show that Fidelity received your instructions with enough time to act in December. Usually, you can get relief from penalties if you can demonstrate that the failure to meet a requirement was due to reasonable cause. See the instructions for Form 5329.
>
> Ira Smilovitz, EA

This was opened like a normal checking account within the IRA. I write/send the checks to the charity myself.

[ira smilovitz]

On Sunday, January 29, 2017 at 2:00:25 PM UTC-5, Retired wrote:
> On Sunday, January 29, 2017 at 9:14:23 AM UTC-8, ira smilovitz wrote:
> > On Friday, January 27, 2017 at 9:16:38 PM UTC-5, Retired wrote:
> > > For my 2016 RMD I sent checks directly from my Fidelity IRA to several charity's in Dec. but 3 of them were not posted until Jan. Because of this, my 1099R does not show my full RMD. How do I handle my 2016 taxes to account for this?
> > >
> > > --
> >
> > The key date is when Fidelity issued the checks, not when the charity cashed it. If the issue date was very early in January, you may be able to show that Fidelity received your instructions with enough time to act in December. Usually, you can get relief from penalties if you can demonstrate that the failure to meet a requirement was due to reasonable cause. See the instructions for Form 5329.
> >
> > Ira Smilovitz, EA
>
> This was opened like a normal checking account within the IRA. I write/send the checks to the charity myself.
>
> --

Then the date you wrote and mailed the checks determines timeliness. You'll probably have to complete Form 5329 to request a waiver of the excess accumulation tax.

You may also have a problem on your 2017 return when Fidelity reports a larger distribution on Form 1099-R.

Ira Smilovitz, EA

[Arnie Goetchius]

Retired wrote:
> On Sunday, January 29, 2017 at 9:14:23 AM UTC-8, ira smilovitz wrote:
>> On Friday, January 27, 2017 at 9:16:38 PM UTC-5, Retired wrote:
>>> For my 2016 RMD I sent checks directly from my Fidelity IRA to several charity's in Dec. but 3 of them were not posted until Jan. Because of this, my 1099R does not show my full RMD. How do I handle my 2016 taxes to account for this?
>>>
>>> --
>>
>> The key date is when Fidelity issued the checks, not when the charity cashed it. If the issue date was very early in January, you may be able to show that Fidelity received your instructions with enough time to act in December. Usually, you can get relief from penalties if you can demonstrate that the failure to meet a requirement was due to reasonable cause. See the instructions for Form 5329.
>>
>> Ira Smilovitz, EA
>
> This was opened like a normal checking account within the IRA. I write/send the checks to the charity myself.
>

I don't understand what you did.

(1) First you say "I sent checks directly from my Fidelity IRA" which sounds
like the Fidelity actually issued and mailed the checks to the charities.

(2) Now you say "I write/send the checks to the charity myself." That means to
me that you actually wrote the checks your self showing a date for 2016 and then
mailed them yourself to the individual charities. If that was the case, then a
copy of your canceled check showing the 2016 should be enough to satisfy the
requirements that the payments to the charities were made in 2016

[BignTall]

On 1/29/2017 12:55 PM, Retired wrote:

>
> This was opened like a normal checking account within the IRA. I
> write/send the checks to the charity myself.
>

Here is the way I see your situation - and it isn't what you
want to hear:

By dating and mailing checks in 2016 you met the timeliness requirements
for 2016 charitable contributions.

Fidelity received your instructions to make the distributions
when they received and cashed the checks you wrote in January 2017
so the distributions are 2017 distributions.

The way the timing worked out, you had charitable contributions
in 2016 and IRA distributions in 2017.

Since the distributions are 2017 distributions, you do not have
2016 QCDs. You do however have 2016 'Gifts to Charity' that can
be deducted on Schedule A (which may or may not do you any good).
For 2016 you also did not meet the RMD requirement. You should
file Form 5329, explain what happened, make it clear that the
missing 2016 RMDs were taken in January 2017, and request a

waiver of the excess accumulation tax.

[Alan]

On 1/29/17 9:56 PM, BignTall wrote:
> On 1/29/2017 12:55 PM, Retired wrote:
>
>>
>> This was opened like a normal checking account within the IRA. I
>> write/send the checks to the charity myself.
>>
>
> Here is the way I see your situation - and it isn't what you
> want to hear:
>
> By dating and mailing checks in 2016 you met the timeliness requirements
> for 2016 charitable contributions.
>
> Fidelity received your instructions to make the distributions
> when they received and cashed the checks you wrote in January 2017
> so the distributions are 2017 distributions.
>
> The way the timing worked out, you had charitable contributions
> in 2016 and IRA distributions in 2017.
>
> Since the distributions are 2017 distributions, you do not have
> 2016 QCDs. You do however have 2016 'Gifts to Charity' that can
> be deducted on Schedule A (which may or may not do you any good).
> For 2016 you also did not meet the RMD requirement. You should
> file Form 5329, explain what happened, make it clear that the
> missing 2016 RMDs were taken in January 2017, and request a
> waiver of the excess accumulation tax.
>

I think I agree in part and disagree in part. There is no QCD because
one of the requirements was not met. Specifically, the one that says the
distribution would have been included in gross income except for the
exclusion. In this instance, the distribution did not occur in 2016. It
is a 2017 taxable distribution. As such, there is no 2016 QCD. There is
no 2016 distribution as the funds were not withdrawn until 2017. I
believe the IRS will waive the 50% excess accumulation penalty due to
circumstances.

This still leaves the issue as to whether there was a completed gift to
a charity in 2016. If the check had been drawn against a regular demand
checking account, then posting it in 2016 would have led to a 2016
charitable deduction. But this check was not drawn against such an
account. As such, there could not be constructive receipt by the charity
nor can the mailing in 2016 be considered delivery. The funds did not
become available to the charity until they were distributed by the IRA
trustee.

In my view, there is no charitable deduction available for 2016. There
is still going to be a requirement to take a 2017 MRD. A QCD can be
setup for the 2017 MRD to avoid being taxed. The open question, is
whether the late 2016 MRD taken in January can be considered a 2017 QCD.
This requires we look at one of the other QCD requirements. The one
that says you would have been able to deduct this payment as a
charitable contribution had it not come from the IRA. I believe it
passes that test because as stated previously, mailing it in 2016 is not
considered delivery when the check is not drawn against a demand
account. It would be a charitable deduction in 2017 but for the
exclusion. So, unless the maximum of $100,000 is hit, the January
distribution and the 2017 MRD can both be QCDs.

[BignTall]

Given the available, incomplete information, I guess I will still stick
with the opinion that the charitable contributions were made in 2016.
The OP stated that some checks did get posted in 2016 and he appeared
surprised that others were not posted until 2017. The implication I
drew was that the charities received the checks in 2016 and some were
slow to cash them. If a confirmation letter shows a 2016 donation
date, I think the OP will have a hard time convincing the IRS the
donation can be part of a 2017 QCD.

The OP also stated "This was opened like a normal checking account
within the IRA" so it isn't at all clear to me that the checks
weren't written on a demand account. An IRA is a type of trust
and trusts have demand accounts all the time and all the custodian
did here was allow the IRA holder to also write checks.

Even if the check wasn't drawn on a demand account, it was drawn
on an account that is functionally equivalent to a demand account
and I doubt that the IRS tries to make a distinction any more. A lot
of charitable contributions have been made by people writing and
mailing checks drawn on investment and savings accounts of many
types for decades now. I've never heard of a charitable contribution
mailed in December not being considered as a December contribution
because a valid check that cleared normally in January was drawn on
the "wrong type" of account. Obviously, I may be totally wrong
and ignorant with this analysis - if others have different
experiences, I would love to hear about them.

To me, it looks like the OP did the things necessary to make
sure all the charitable contributions were 2016 contributions.
Trying to reclassify some of the contributions so they can be
part of 2017 QCDs seems unlikely to hold up if the tax return
gets examined.