Products

Please check back frequently for the latest updates.

New Reporting Codes for Qualified Charitable Distributions

The Consolidated Appropriations Act of 2016 regarding QCDs was made permanent in 2015. One of several provisions regarding IRA changes was the ability for 70.5 year old IRA accountholders and beneficiaries of IRAs who have attained the age of 70.5 or older to use their RMD amount plus more up to $108,000 per year for 2025 to make tax-exempt charitable contributions directly from an IRA to qualified charities.

The following procedure must be followed in order for the client to take a tax exemption:

1. IRA account owners and beneficiaries of IRAs who have attained the age of 70.5 or older will instruct the financial institution to take a distribution from their IRA and have a bank check or cashier's check made payable directly to a Qualified Charity. The financial institution can mail the check directly or the IRA accountholder can mail it to the charity

2. NEW for 2025: The financial institution will now code the distribution as either a "QCD normal distribution" if coming from an IRA owner's account (IRS code "Y 7" in box 7 of the 1099-R) or a "QCD death distribution" if coming from an Inherited IRA (IRS code "Y 4" in box 7 of the 1099-R). This should NOT be coded as an IRS Code "F" - "Charitable Gift Annuity"

3. The IRA accountholder will take the tax exemption on the IRA distribution line of his/her tax return (line 4a and 4b of the 1040 form) and put the letters "QCD" next to 4b to take the exemption. See the 1040 instructions for more details.

"IRA Update": In July 2024, the IRS released IRS Notice 2024-190 which finalized the Proposed Regulations released in February 2022 and clarified the Beneficiary Payout Options.

Effective 2025: Beneficiaries of owners who died beginning in 2020 and the owner had reached his/her Required Beginning Date (April 1st of the year after RMD age) can no longer skip death distributions in years 1-9. Simply put, if the owner was in RMD status at death, the beneficiary must begin taking distributions the year after the owner died based on the younger age of the beneficiary or deceased owner. Those must continue in years 1-9 and then closed by 12/31 of the 10th year after the owner dies. For beneficiaries of owners who died between 2020-2024, the IRS did not impose a late penalty if distributions were not taken. Beginning in 2025, they must start RMDs for the remaining 9-year period and still have the Inherited IRA closed by 12/31 of the 10th year after the owner died. To obtain the 2025 divisor: Using the Single Life Table look up the age of the beneficiary in the year after death, or the owner's age in the year of death (if younger than the beneficiary) and subtract one for every year up to 2025 to get next year's divisor.

SECURE Act 2.0 signed into law December 29, 2022

Raises Required Minimum Distribution age to 73 for those born between 1951 and 1959.

Raises Required Minimum Distribution age to 75 for those born after 1959

IRS 50% Excise Tax Reduced for Excess Accumulations (under-distributing your RMD amount)

The IRS has reduced the penalty for not taking the full amount of an RMD from a 50% penalty to a 25% penalty effective for 2023 RMDs.
If the client corrects the amount within a reasonable period of discovering the error - usually by the tax-filing deadline including extensions - the penalty may drop as low as 10%..
The client can still apply for a waiver of the penalty from the IRS in certain situations.

New W-4R Federal Withholding Requirements

The W-4P will no longer be used for an IRA client to choose to opt out or choose a percentage of federal withholding. From January 2023 forward, the W-4R will replace the W-4P and be used as follows:

'On-Demand' Nonperiodic Payments - An IRA Distribution Form with a W-4R must be completed and signed for every IRA distribution where the client is not choosing the default 10% federal income tax withholding. On line 2 of the W-4R the client can choose 0-100% federal income tax withholding. If that form is not signed by the client for each withdrawal, the bank must default to 10% federal income tax withholding.

'Scheduled Automatic Payments' (monthly, quarterly, annually, etc.) When a client sets up a scheduled payment from an IRA beginning in 2023, they must make the federal withholding election on the W-4R when setting up the schedule. The bank must annually notify these clients by sending them an Annual Notice of Federal Withholding no more than 6 months before the scheduled payment date that they have the right to change their withholding election on file by completing a new W-4R.

Existing clients set up on "Scheduled" payments who previously signed a W-4P choosing a percentage of federal withholding (as opposed to a flat rate) do not have to sign the new W-4R unless they change their federal withholding election.

IRA SECURE Act Amendments - IRS has postponed mandatory amendments to customers until December 31, 2026.

IRA Regular Contribution Deadline for Traditional, Roth, Coverdell ESAs and Health Savings Accounts for 2025 is Wednesday, April 15, 2026

12/31/2021 IRS has released new Uniform, Joint and Single Life Expectancy Chart for use in calculating distributions effective for 2022.

Beneficaires who are currently using the divisor from the old SLE Table can 'reset' their single life expectancy by looking up their age in the year after death from the new table and subtracting one for every year up to the current distribution year.

IRA Rollovers Were Changed In 2015

Effective January 1, 2015, the new definition of the "once-per-12 month" rule applies to the IRA accountholders "aggregate" IRAs - NOT per IRA, NOT per plan type and NOT per financial institution. Once an accountholder has taken money out of ANY of their IRA plans and rolled those funds over, the accountholder cannot do any more rollovers from any of his/her IRAs for the next 12 months - starting from the date of the distribution. Any additional distributions will be ineligible for rollover during that 12-month period. This does not apply to QP to IRA rollovers or conversions from Traditional or SEPs to Roth IRAs. Additional IRA to IRA movement must be done as direct IRA to IRA non-reportable "transfers".

August 24, 2016 IRS releases 11 exceptions when the financial institution may accept late rollovers (past 60 days) if the accountholder "self-certifies" the exception.

The accountholder will sign a "self-certification" letter provided by the financial institution choose the exceptions that apply. The bank will report the late rollover in box 13a of the 5498 as a "postponed contribution" - not in box 2 as a "rollover" contribution. In box 13c of the 5498 the financial institution will use the code "SC" for "Self-Certification".