Tax Reporting of Charitable Rollovers

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					Tax Reporting of Charitable IRA Gifts

Many IRA custodians were concerned about how they were to properly report to the IRS
charitable IRA gifts their clients made from their IRAs. Without IRS guidance,
administrators and custodians were reluctant to process these transactions. Fortunately,
the IRS has clarified the tax reporting procedures since the law came into effect.

      The IRA administrator will provide the donor with a Form 1099-R by Jan. 31
       following the year of the gift. It will show the transaction as an IRA distribution.
       The Form 1099-R is sent to the donor and the IRS.

      Taxpayers will then include that amount on line 15a (IRA distributions) of IRS
       Form 1040, and include a zero on line 15b (taxable amount) to exclude the
       distribution from taxable income.

      These charitable IRA gifts are not included on Schedule A of IRS Form 1040
       where regular, tax-deductible charitable gifts are recorded.

           1. John, aged 74, made a charitable IRA gift under this legislation. He
              had his IRA administrator transfer $10,000 to his favorite charity on
              Dec. 1, 2010.

           2. John’s IRA administrator will issue an IRS 1099-R showing the
              $10,000 distribution from his IRA by Jan. 31, 2011.
           3. John will include $10,000 on line 15a of his IRS Form 1040 for Tax
              Year 2010 and $0 on line 15b.

The rules for tax reporting of these charitable gifts allows the IRA administrator to
process these gifts without any liability to determine if the gift qualifies under the law.
The duty falls on the donor.

For more information: See the following excerpt from 2009 IRS Instructions for Form
1040, pages 24-25:

       If the distribution is a qualified charitable distribution (QCD), enter the total
       distribution on line 15a. If the total mount distributed is a QCD, enter -0- on line
       15b. If only part of the distribution is a QCD, enter the part that is not a QCD on
       line 15b unless Exception 2 applies to that part. Enter “QCD” next to line 15b.

       A QCD is a 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 (with certain exceptions). You must have been at least age 70½
       when the distribution was made. Your total QCDs for the year cannot be more
       than $100,000. (On a joint return, your spouse can also have a QCD of up to
       $100,000.) The amount of the QCD is limited to the amount that would otherwise
       be included in your income. If your IRA includes nondeductible contributions, the
       distribution is first considered to be paid out of otherwise taxable income.

       You cannot claim a charitable contribution deduction for any QCD not included
       in your income.