IRS Provides Information on IRA Provisions of Fiscal Cliff Deal
The American Taxpayer Relief Act (ATRA) of 2012 extended the ability to roll over tax-free Individual Retirement Accounts (IRA) to charity while expanding the ability to do in-plan Roth IRA rollovers.
IRA owners age 70 ½ or older are allowed to transfer up to $100,000 to eligible charities tax-free for both 2012 and 2013. Transfers for 2012 must be completed by Feb. 1, 2013. The ATRA extended the qualified charitable distribution (QCD) provisions for 2012 and 2013 and included several transition rules to enable taxpayers to treat a donation before Feb. 1 as a 2012 QCD.
An IRA owner can treat a contribution to a qualified charity before Feb. 1 as a 2012 QCD in either of the following circumstances:
- The contribution is a cash contribution to the charity of all or a portion of an IRA distribution made to the IRA owner in December 2012, provided that it would have been a 2012 QCD if it had been paid directly from the IRA to the charity in 2012
- The contribution is paid directly from the IRA to the charity, provided that it would have been a 2012 QCD if it had been paid in 2012
The IRS urged IRA owners to keep record to substantiate the timing of contributions and distributions.
The ATRA also expanded the ability for individuals with designated Roth accounts to roll over an amount from a non-Roth account to a designated Roth account in the same plan. Previously, the amount individuals could roll over was limited to the amount the individual could have distributed from the plan, usually because the individual had reached the age of 59 ½ or was no longer employed.
Starting in 2012, a 401(k) plan can permit this type of rollover for an amount not eligible for distribution at the time of the rollover, such as an amount in an individual’s regular pre-tax elective deferral amount when the individual is not eligible for a distribution from that account.
A similar expansion was put in place for 403(b) plans and governmental 457(b) plans. The IRS plans to issue guidance later this year about the expanded in-plan Roth rollovers.