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  • 1.  IRA check deposit date clarification

    Posted 12-21-2023 02:22 PM

    Hello all!

    We follow gift date procedures outlined in John's recent publication and advise donors of the postmark rule. I've had two donors state this week that their IRA custodian advised them that if their IRA QCD and/or RMD checks are not DEPOSITED to our bank by 12/31, then their IRA RMD will apply to 2024. Has anyone else heard this from donors? I suspect it may be related to checks a donor could write from their IRA directly (as discussed in a thread earlier this week) but for checks sent directly from the IRA company, would it be true that these need to be deposited and cleared by EOY?



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    Jayme Fancher
    San Diego State University
    jfancher@sdsu.edu
    ------------------------------


  • 2.  RE: IRA check deposit date clarification

    Posted 12-21-2023 03:03 PM
    These "deposit rules" apply only to RMDs. QCDs are less important as they are not "required."And, yes, they must clear the IRA bank (NOT YOUR BANK) by 12/31.

    This is usually not an issue when the custodian cuts the check as they have "withdrawn" the funds on paper. However, every custodian has their interpretation.

    Anyway, it is for this reason, as well as credit card donations, which must also be posted by 12/31, that I urge my clients to have staff open mail on 12/31!

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987




    Original Message


  • 3.  RE: IRA check deposit date clarification

    Posted 12-21-2023 03:52 PM

    Very interesting. Given 12/31 is a Sunday and the bank would not process the transaction even if we did scan checks that day, is there RMD credit given to a donor who (in theory) postmarks the IRA check 12/31 but it is not processed by our office and bank depostied until 1/1? Or do they get 2024 RMD credit? Seems like IRA checks should be moved to the front of our processing line if this is the case.



    ------------------------------
    Jayme Fancher
    San Diego State University
    jfancher@sdsu.edu
    ------------------------------

    Original Message


  • 4.  RE: IRA check deposit date clarification

    Posted 12-21-2023 03:54 PM
    1/1 is a bank closure date, too.

    Yes, these checks should be moved to the head of the class and you should do everything possible to process them the day you receive them.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 5.  RE: IRA check deposit date clarification

    Posted 12-21-2023 03:57 PM

    Ah, yes! The other bank holiday! 

    Thank you, as always!



    ------------------------------
    Jayme Fancher
    San Diego State University
    jfancher@sdsu.edu
    ------------------------------

    Original Message


  • 6.  RE: IRA check deposit date clarification

    Posted 12-22-2023 09:14 AM

    Definitely yes, give these priority. I think it's also worth noting that the important document from the IRS' standpoint is the 1099-R issued by the retirement plan and reported to the IRS. If the amount shown does not meet the minimum required distribution, the penalties John mentions kick in. This is why it's important for the money to have left the donor's retirement account by December 31. Anything after that is not going to be reported on the 1099-R until the next year and thus could trigger the penalties.

     

    QCD/RMDs are tax avoidance not tax deductions. In other words, by making the distribution directly to a qualified charity, they don't have to report the distribution as income and are therefore not taxed on it. This is all handled in the Income section on a 1040. It's not a deduction and therefore, not included in your charitable giving on your Itemized Deduction – Schedule A.

     

    So, while, any time we issue a receipt it needs to be done correctly, our receipt is more of a player (as opposed to the central document) in this issue since the IRS will evaluate what is reported on the 1099-R to determine if a penalty situation is in order. Thus, it ultimately circles back to the importance of the money having left the retirement account by 12/31. By entering it as an IRA distribution, your receipt letter should trigger language that identifies it as such and should make reference that it is a qualified charitable distribution under section 408(d)(8) of the Internal Revenue code. This reference is the most important part of the receipt for the donor, in my opinion, as it validates that the distribution went to a qualified charity – something that may or may not be explicitly stated on the 1099-R.

     

    Happy year end processing!

    John Smilde

    Director of Gifts and Records Administration

    Advancement and Alumni Relations

    George Mason University

    4400 University Drive, MSN 1A3

    Fairfax, VA 22030

    703.993.8680

    jsmilde@gmu.edu

     

    This electronic message contains confidential information which is, in whole or in part,

    subject to exclusion from disclosure under the Freedom of Information Act pursuant to

    §2.2-3705.4.7. of the Code of Virginia.

     

     

     




    Original Message


  • 7.  RE: IRA check deposit date clarification

    Posted 12-22-2023 10:06 AM
    Well said, John. However, an RMD can be tax-deductible if used as a gift to charity as the donor pays taxes upon withdrawal. A QCD, on the other hand, avoids all taxes.

    If I may, I would like to get up on a soapbox briefly:

    Earlier, it was suggested that it is the donors' responsibility to know the rules. And that if they don't send an IRA distribution check soon enough to meet the 12/31 deadline, that's not our fault. I can't entirely agree with that statement.

    Yes, donors should know the rules. But they don't always. Furthermore, even if they know the rules, they can reasonably expect that if they mail an IRA distribution check a week before the end of the year, we will deposit those funds by 12/31. It is not the donors' fault that some organizations choose to close their doors and not try to check the mail between Christmas and New Year's. Yes, we can educate donors through advance mailings. But those only go to some people - and are only sometimes read.

    We are culpable if our lack of action causes the donor to miss the 12/31 deadline for an RMD withdrawal, resulting in up to a 25% penalty against the donor. At the very least, we better prepare for a negative donor relations episode. Last year, I observed one donor who took their concern with the charity to social media.

    With QCDs, the issue is less severe as no penalties are involved - MAYBE. A donor can use a QCD to satisfy their RMD requirement. If that was their intent, the same penalty applies for failing to meet their RMD on time. As a straight QCD, our lack of action may cause the donor to miss an opportunity to make a QCD in the year that just ended. That could impact our bottom line.

    We must take our fiscal responsibilities seriously for these and credit card donations, which must also be approved by the bank by 12/31, regardless of the mailing date. I understand why some institutions may shut down over the holidays. But that closure does not eliminate our need to be proper stewards of our donors contributed funds.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 8.  RE: IRA check deposit date clarification

    Posted 12-22-2023 10:49 AM

    Thanks for the clarification John and for the important message. We are the first interaction a donor has "after" the gift and thus likely their first validation of how sincere we were about our partnership "before" they made a gift. Just good stewardship.

     




    Original Message


  • 9.  RE: IRA check deposit date clarification

    Posted 12-21-2023 06:07 PM
    Here's a nice blurb on the subject from PG Calc. While the question pertains to QCDs, it also applies to RMDs. The language in IRS material all references "withdrawing" the money from the IRA by 12/31 to count for that year:

    How do I determine the gift date?

    The legal date of gift for all QCDs, whether outright or used to establish a life income gift, is the date they leave the donor's account. For checks received directly from the IRA custodian, charities can use the date the check is issued. For checks received from donors written against their IRA accounts, best practice is for the charity to contact the donor and request the date the QCD was debited from their IRA.

    While you can't believe everything you read, a friend shared the following from a nonprofit blog that offers a good summary:

    "If you receive a check from a donor who has check-writing privileges from their IRA account, be sure to cash the check by Dec. 31. For qualified charitable distributions (QCDs), the gift is complete when it clears the donor's account, not when the check is mailed. If the donor uses their required minimum distribution (RMD) to make the gift and the nonprofit does not cash the check by Dec. 31, the RMD will not be withdrawn in time and the donor could incur an IRS penalty of 25% of the amount not withdrawn. Note: This is a different standard than if the donor simply wanted to make a charitable donation from a regular checking account. In that case, the gift is complete when the check is mailed."


    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987


    On Thu, Dec 21, 2023 at 4:53 PM John Taylor <johntaylorconsulting@gmail.com> wrote:
    1/1 is a bank closure date, too.

    Yes, these checks should be moved to the head of the class and you should do everything possible to process them the day you receive them.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


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