Reporting Charitable IRA Distributions on Tax Returns Can Be Confusing

Taxpayers need to be careful when reporting charitable gifts from their IRA on their tax returns, or they may end up overpaying Uncle Sam.

Question: I transferred part of my required minimum distribution directly from my IRA to charity, which should be a tax-free charitable distribution and not included in my adjusted gross income. The problem is that my broker reported the entire RMD on my Form 1099-R as a taxable distribution. Should I get my broker to amend the 1099-R to specify how much of the total distribution was a tax-free charitable transfer so the discrepancy doesn’t raise red flags with the IRS? And how will my tax preparer know that part of the distribution shouldn’t be taxable?

Answer: Even though your broker made the tax-free transfer from your IRA to charity (called a qualified charitable distribution or QCD), your 1099-R form is going to report the total amount of the distribution. “The QCD is invisible in the 1099-R,” says Ed Slott, CPA, an IRA expert and publisher of “The forms are not coded for a QCD, and it looks the same as a distribution. It’s up to you to tell your tax preparer that part of the distribution was a QCD.”

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.