What To Know Before Setting Up A Qualified Charitable Distribution

I just realized yesterday that this month I turned 70 and a half. So guess what I want to do. You want to do a charitable contribution? You got it. And I have. I have three quick questions for you. Okay.

First of all, how do I set it up with the ability to write a check? Is there a max that can be pulled out per year, and can it go towards my RMD in a couple of years? Great questions. So the way that you set it up is you’ll just contact thebrokerage firm that you. That holds your IRA account, and you’ll just ask them to set you up with some checks.

Make sure that you ask them questions about how they handle taxes on that, if you can. You know, if you have, like, a monthly distribution, and maybe you have, you know, 10% or 15% held out, do they apply that to your gifts as well? Ifthey do, you may want to ask them, you know, not to do that. Or, I don’t know, maybe you do, depending on what your tax situation looks like.

But they will typically just issue you a checkbook, and then you can write checks directly from your IRA account. Now, you’re going to want to make sure that before you write the check, that you have the cash to cover it. You know, if youhave to sell some things to, to generate that cash, I want to make sure that the cash is available before you send that check over.

Then I would say that a lot of times when you send the check, unless your name is on the check somewhere, the organization that you’re sending it to won’t know that it came from you. So you can put a memo in there if you want to. Ifyou want them to know that it’s from you.

If you use the standard deduction, though, on your taxes, there’s a way that you need to report this to make sure that it comes out tax free. It’s very easy. You’ll typically get a letter, or maybe you can use your canceled check, if you get acopy of that canceled check from your IRA account as proof that the money went to a nonprofit organization, because you have to report that on your tax return.

If you use a 1040, it’s around line four A or four b, you, your 1099 that you get will report all of the income that is distributed from your IRA account, whether it goes to you or to somebody else or to a nonprofit organization. You have tomake that distinction on your tax return. You have to tell them how much of it was not taxable.

If the organization doesn’t know that it came from you, you probably won’t get a giving statement at the end of the year, but that’s okay because if you’re not itemizing, you can’t use that for your, for your deductions anyway. The max onthat, you can do $100,000 in a year. So for most people the maximum is not going to come into play unless you have a really large IRA and you want to do some major giving.

And then as far as the required minimum distribution question, you don’t have one this year, but you will in short order. Your required minimum distribution is calculated every year based on the December 31 value of your IRA accountfor the previous year and your life expectancy. So when you do have that required minimum distribution, you typically will be notified by your brokerage company how much you have to take out for the year, and it will count toward that.

So the way that the IR’s knows that you’re taking the amount of money that you’re supposed to a 5500 is, I’m sorry, 5498 is issued every year on your IRA. It reports the holdings and the value to the IR’s, and then your 1099 is going toreport all of your distributions to the IR’s. So as long as those numbers match, you’re in good order.

If you take out less than what you have to, the IR’s is going to impose a 50% penalty on what you should have taken but didn’t.

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