IRA Rollover Update: Special Rule for RMDs taken after 11/30/12!!

Thank you readers who brought to my attention something new about the Fiscal Cliff version of the Charitable IRA provision!

After being alerted and reading the Fiscal Cliff legislation more closely, we found that Congress decided this time to offer relief for donors who wanted to use the Charitable IRA provision in lieu of their Required Minimum Distributions (RMDs).

 This new rule, which was not part of previous reenactments of the IRA giving law, applies as follows:

  • Donors who took their RMDs after 11/30/12 to themselves;
  • And, would rather have gifted those funds to charity (and not be taxed on their RMDs);
  • May make contributions to qualified charities in the same amount as their RMDs (taken in December) by 2/1/13; and
  • Not have to pay income tax on those 2012 RMDs (only ones taken in December)!

Obviously, your donor does not get a 2013 charitable deduction but this is a very important opportunity for those donors who were waiting (as we suggested) to take their RMDs late in the year (in case the IRA giving law was reenacted).

 What Can Fundraisers Do About This Special Provision?

Any donors who you know or suspect were waiting for the IRA rollover to pass, and may have waited until December to take their RMDs, should receive a phone call, email, letter or visit from you asap.

This is a great opportunity for tax savings and a potential gift for your organization for up to $100,000.

6 comments

  1. Thank you for this information.
    Crescendo has a full package going
    out today. This should be welcome news to
    All that waited till Dec to take the RMD.
    Maybe good things do come to those who
    Wait !

    Best,

    Jim Eckel

  2. Still confused. I normally allocate part of my RMD direct to charity, however in late December, assuming the rollover would be discontinued for 2012, I took my RMD into taxable income and wrote checks out of my taxable account to charity. Can i retroactively recharaterize those Decemeber charity checks as IRA distributions ( up to $100,000) and reduce my taxable income accordingly, or does the new provision only apply to brand new IRA distributions in January that go direct from the IRA to charity up to the $100,000 ceiling? And impact 2012 taxable income and charitable contributions?

    1. The new law allows you to re-characterize those Dec. RMD withdrawals you took to yourself into tax-free IRA gifts. You need to send a check(s) in January to your intended charity(s) with a statement that these gifts are being made pursuant to the new provision in IRS code section 208 to be considered as qualified charitable distribution for 2012. The charity should acknowledge that they received your gift in January and that they intend to treat your gift as a qualified distribution from an IRA. You will want to provide a copy of both to your accountant.

      In addition, the new provision allows those who didn’t take December IRA withdrawals to make direct IRA gifts in January that would count as 2012 gifts (doesn’t offset any Dec. RMD withdrawal income but does not count towards 2013 IRA giving limits).

  3. My question really pertained mostly to those charity checks I wrote in December, that would have come directly from my IRA to the charity ( and not impacted my taxable income) had the old rollover provision been operable. Can I reduce my taxable income by rechareterizing those checks as direct distributions (QCD’S) from my IRA, which is what I would have done had the IRA rollover provision been in effect in December. I understand I can make additional distributions in January direct from my IRa to charity that can apply to 2012, but what about the checks I wrote in December?

    1. Great question – I just addressed it for a client and wrote a blog post for tomorrow on it.

      Bottom line – if you took your RMDs before writing those checks to the charity, I see no reason why you can’t just inform the charities that the checks they received in Dec. are to be re-characterized as qualified charitable distributions under new law. Key to doing this is that you took the IRA withdrawal fist – then any later checks (even those written in Dec.) can be re-characterized as IRA gifts.

      1. Sounds like the key is to get a letter from the charity specifying exactly that the December contribution is deemed to be a gift from the IRA,
        It would be nice if the IRA trustee would oblige accordingly but they wont.
        Many thanks

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