November 15, 2006 – The IRS recently advised BISYS® Retirement Services that a tax-free charitable donation of IRA assets—a new option under the Pension Protection Act of 2006—is to be reported by financial organizations as a normal distribution on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. In addition, the IRS indicated that taxpayers would account for these tax-free donations on Form 1040, U.S. Individual Income Tax Return.
Recently released 2006 tax year Form 1040 and its instructions confirm this. The instructions for completing Lines 15a and 15b on Form 1040 indicate that a taxpayer who makes a “Qualified Charitable Distribution” should enter the distribution on line 15a, enter “-0-” on line 15b (unless part of the distribution is taxable; the tax-free limit is $100,000 per year), and “enter QCD next to line 15b.” Form 1040 and its instructions may be accessed as follows.