Coleman Issues Tax Planning Alert: IRS Announces Deadline to Make Charitable/IRA Rollovers

New Orleans, La.

01.17.2013

On January 16, 2013, the IRS issued a notice (IR-2013-6) advising that certain IRA owners have a limited time to make tax-free transfers to eligible charities and have them count for 2012. IRA owners age 70½ or older have until January 31, 2013, to make a direct transfer, or alternatively, if they received IRA distributions during December 2012, to contribute the amounts received, in cash, to an eligible charity.

The American Taxpayer Relief Act of 2012 extended for 2012 and 2013 the provision (which had expired at the end of 2011) authorizing distributions from an IRA to an owner 70½ or older paid directly to an eligible charitable organization (QCDs). Each year, such an IRA owner can exclude from gross income up to $100,000 of these QCDs.

This option is available regardless of whether the eligible IRA owner itemizes deductions, but a charitable deduction is not available for the transfer. Additionally, QCDs are counted in determining whether the IRA owner has met the required minimum distributions for the year.

For 2012 only, IRA owners can choose to report QCDs made in January 2013 as if they occurred in 2012, and IRA owners who received IRA distributions during December 2012 can contribute part or all of the amounts distributed to eligible charities during January 2013 and have them count as 2012 QCDs.

In sum:

1. An eligible IRA owner may elect to have a charitable IRA distribution made in January 2013 be treated as if it were made on December 31, 2012.
2. An eligible IRA owner may elect to treat any portion of a distribution from an IRA to the taxpayer during December 2012 as a qualified charitable distribution, provided that (i) the portion is transferred in cash after the distribution to an eligible charitable organization before February 1, 2013, and (ii) except for the fact that the distribution was not originally transferred directly to the organization, the distribution otherwise meets the applicable charitable IRA rollover requirements.

For further information, please contact J. Grant Coleman at 504.569.1637 or jcoleman@kingjurgens.com.