IRS reminds IRA owners of pending deadline to make 2012 qualified charitable distributions

IRS has issued a reminder to taxpayers that, as a result of changes made by the American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act), IRA owners who are age 70- 1/2 and older have until Jan. 31, 2013, to make tax-free transfers to eligible charities and treat these transfers as if they were made on Dec. 31, 2012. Additionally, eligible IRA owners who received a distribution in December of 2012 can transfer any portion of that distribution to a charitable organization by Jan. 31, 2013, and treat it as made in 2012.

Background. Taxpayers who are age 70- 1/2 or older can make tax-free distributions to a charity from an Individual Retirement Account (IRA) of up to $100,000 per year. These distributions aren't subject to the charitable contribution percentage limits since they are neither included in gross income nor claimed as a deduction on the taxpayer's return.

This provision was scheduled to expire for tax years beginning after Dec. 31, 2011, but it was retroactively reinstated and extended by the 2012 Taxpayer Relief Act. It is now available for charitable IRA transfers made in tax years beginning before Jan. 1, 2014. (Code Sec. 408(d)(8)(F))

The 2012 Taxpayer Relief Act includes the following two elections to deal with the reinstatement of this provision:

1. A taxpayer may elect to have a distribution made in January of 2013 be treated as if it were made on Dec. 31, 2012.
2. A taxpayer may elect to treat any portion of a distribution from an IRA to the taxpayer during December of 2012 as a qualified charitable distribution, provided that (i) the portion is transferred in cash after the distribution to an eligible charitable organization before Feb. 1, 2013, and (ii) except for the fact that the distribution wasn't originally transferred directly to the organization, the distribution otherwise meets Code Sec. 408(d)(8)'s requirements.

Reminder. IRS has issued a reminder to taxpayers that they have until Jan. 31, 2013, to take the actions described above. Accordingly, for the 2012 tax year, IRA owners can choose to report qualified charitable distributions made in January of 2013 as if they occurred in 2012, and IRA owners who received IRA distributions during December of 2012 can contribute, in cash, part or all of the amounts distributed to eligible charities during January of 2013 and treat them as made in 2012.

IRS stated that qualified charitable distributions are reported on Line 15 of Form 1040, with the full amount of the qualified charitable distribution shown on Line 15a. Taxpayers should not enter any of these amounts on Line 15b, but instead write "QCD” (qualified charitable distribution) next to that line.