Dealing with QCD Anti-abuse Rule for older individuals

[FEDUKE404]

A client (age greater than 70 1/2) has provided me with a copy of their filed 2023 tax return.

On that return, there is shown an RMD from a traditional IRA account, new allowable deductible payment of $3,000 into the traditional IRA account (from a part-time job), and a QCD amount of $1,500.

It is my understanding that under the LIFO rules used by the IRS, with the above scenario the QCD is *not* allowable. Otherwise known as the Anti-abuse Rule.

My question is this: Will the IRS pick up on this issue and send a correction notice / bill, or is an amended 2023 tax return needed?

(Side issue: Suggestions on possibly making a NON-deductible contribution to the traditional IRA??)

Thanks in advance.

FE

[Rapid Robert]

The rule only applies to deductible IRA contributions made after age 70, so a non-deductible contribution avoids problems... It is cumulative, so you actually have to track any carryforward amounts each year. See Pub 590-B for details.

Your actual question is puzzling. First, no one here would know for sure what the IRS will "pick up" or not unless maybe they are a current IRS employee. More importantly, your ethical duty is to inform the taxpayer that they need to file an amended return. Your question is really about playing "audit roulette".

[FEDUKE404]

The rule only applies to deductible IRA contributions made after age 70, so a non-deductible contribution avoids problems... It is cumulative, so you actually have to track any carryforward amounts each year. See Pub 590-B for details.

Your actual question is puzzling. First, no one here would know for sure what the IRS will "pick up" or not unless maybe they are a current IRS employee. More importantly, your ethical duty is to inform the taxpayer that they need to file an amended return. Your question is really about playing "audit roulette".

Thank you for the moral lecture!

One reason I (rarely) post things to the TTB board is to elicit responses from members who MIGHT have previously dealt with a certain issue.

FWIW, the client involved has in recent years added new DEDUCTIBLE funds to his traditional IRA. Even if an amended return (deductible -->> nondeductible traditional IRA funding) were to occur via an amended return, the PRIOR year numbers would still be an issue.

With further facts, the likely scenario will be to REMOVE the QCD amount and pay the taxes on the additional income.

FE