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Include IRA gifts on EoY Giving Summaries?

  • 1.  Include IRA gifts on EoY Giving Summaries?

    Posted 01-14-2020 03:49 PM
    Hi Listers?
    I hope this email finds you well and you surviving the deluge of December gifts.  At Loyola, we are preparing to send out end of calendar year donation summaries to anyone who has given more than two tax deductible gifts this calendar year.  
    Since there has been a recent influx on donations made via IRA transfers, I am curious to know if you are going to send end of year giving summaries to those donors who have made multiple gifts through both traditional check and IRA transfers.  When a donor makes a gift via an IRA, we immediately send out a thank you letter as well as a letter with specific language regarding QCDs and RMDs, but we do not make this distinction for the donor (sample language is at the end of this e-mail). 
    Do you think it is necessary to send them a summary itemizing the regular gifts that come through checks and the IRA gifts?
    Any insight you have on this would be greatly appreciated.

    Thank you for your gift in the amount of $300.00 from your Individual Retirement Account to Loyola University New Orleans. We are writing to acknowledge that we received your gift postmarked October 31, 2019. Therefore, all or a portion of your gift may qualify as a qualified charitable distribution from your IRA under section 408(d)(8) of the Internal Revenue Code and the Protecting Americans from Tax Hikes Act of 2015. 

     

    In that connection, we warrant to you that our organization is qualified as a public charity under section 170(b)(1)(A) of the Internal Revenue Code and that your gift was not transferred to either a donor advised fund or a supporting organization as described in section 509(a)(3).   Please note:  A QCD is not a tax-deductible charitable gift.  A QCD may, however, count towards the annual IRA required minimum distribution (RMD) and not be deemed taxable income. 

     

    Should this gift fall outside of your RMD, it may be tax deductible in whole or in part as a charitable contribution. Please consult your tax advisor to determine whether and to the extent to which your donation may be deductible.  Please retain this letter with your important tax documents and provide a copy to your tax preparer.



    ------------------------------
    Heather Breerwood
    hbreerwo@LOYNO.EDU
    ------------------------------


  • 2.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-14-2020 04:07 PM
    I think you are providing way too much tax-related information to the donor.  Furthermore, IRA distribution rules are more based on when the check was cashed - or cut by the financial institution.  Not when they were mailed.

    I am generally opposed to end of year gift summaries to begin with.  Sure, one or two donors may like the summary but that isn't enough reason to bend over backward and go to the expense of producing them for everyone.  Situations like these fule my concerns about 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






  • 3.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-14-2020 04:19 PM
    We are only do annual year end receipts for folks that have payroll deduction and EFT gifts, which is our internal rule. We only have a handful of donors that give outright gifts that have requested one annual receipt.

    Our conversation has been around if the payroll and EFT donors make other outright gifts should we be including those gifts in the year end receipt, instead of sending them receipts throughout the year.

    Liz





  • 4.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 08:38 AM
    John,

    We have the following language on our IRA receipt:

    Thank you for your gift in the amount of $300.00 from your Individual Retirement Account to Loyola University New Orleans. We are writing to acknowledge that we received your gift postmarked October 31, 2019. Therefore, all or a portion of your gift may qualify as a qualified charitable distribution from your IRA under section 408(d)(8) of the Internal Revenue Code and the Protecting Americans from Tax Hikes Act of 2015. 

     In that connection, we warrant to you that our organization is qualified as a public charity under section 170(b)(1)(A) of the Internal Revenue Code and that your gift was not transferred to either a donor advised fund or a supporting organization as described in section 509(a)(3).


    Is none of the above necessary?

    Liz






  • 5.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 08:47 AM
    None of that is necessary.  Postmarks are essentially irrelevant as they prove little generally.  But when it comes to certain IRA payments what matters is when the check is cashed - not mailed.

    An IRA should look like any other gift receipt.  It confirms when you received or processed the gift - never implying a legal date of the gift.  And it should identify whether the payment was a QCD versus an RMD as those have very different tax treatments.

    Sometimes the issuing financial institution will send a confirmation letter you may need to execute.  But generally speaking, your standard receipt indicating what type of IRS payment you received is sufficient.

    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






  • 6.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 09:12 AM
    John, this is all incredibly helpful.  Thank you again.

    On many IRA checks, especially ones that come through personal IRA checkbooks, it is unclear whether a gift is a RMD or a QCD.  What do you suggest we do in those cases?

    ------------------------------
    Heather Breerwood
    hbreerwo@LOYNO.EDU
    ------------------------------



  • 7.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 09:29 AM
    Guess :-).

    No, seriously, there isn't much you really can do.  Ultimately it is the responsibility of the donor to determine what to do.  And fortunately, the IRA custodian has filing requirements as well.

    My main point is that not all IRA withdrawals are created equal.  They require different handling on tax returns depending on whether they are a QCD or an RMD.  The former is NOT a tax-deductible gift. Instead, it is a tax-free withdrawal.  The latter is a tax-deductible gift as the donor has had taxes withheld (or will).

    But this is another reason why are receipts should never state "your gift is tax-deductible" because not all gifts are!  Nowhere in Publication 1771 does it say to make that statement.  Only that you received the gift and no goods or services were provided.  And you cannot offer any goods or services for QCDs beyond token benefits.  They must be wholly charitable.  But you can RMDs as long as you do a QPQ receipt!

    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







  • 8.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 08:51 AM
    I should have added that some institutional attorneys have suggested that you reference the relevant tax code in these receipts.  I never have and have never had pushback.

    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


    On Wed, Jan 15, 2020 at 6:47 AM John Taylor <johntaylorconsulting@gmail.com> wrote:
    None of that is necessary.  Postmarks are essentially irrelevant as they prove little generally.  But when it comes to certain IRA payments what matters is when the check is cashed - not mailed.

    An IRA should look like any other gift receipt.  It confirms when you received or processed the gift - never implying a legal date of the gift.  And it should identify whether the payment was a QCD versus an RMD as those have very different tax treatments.

    Sometimes the issuing financial institution will send a confirmation letter you may need to execute.  But generally speaking, your standard receipt indicating what type of IRS payment you received is sufficient.

    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






  • 9.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 08:50 AM

    John,

     

    Can you provide clarity around the rule you mentioned about when the IRA checks are cut or cashed, not mailed.

     

    We have a situation where the donor had her QCD mailed to her home, she included a letter to us that it had be cashed prior to 12/31, then mailed both to the campus general mail center which was closed during the holiday break (our university was closed 12/23 through 1/2).  By the time the mail center re-opened, sorted the mail, and figured out that the check was for Advancement (it didn't say so on the outside), we didn't get the check in hand until Monday. 

     

    The check itself is dated 12/20.  I'm not sure what to tell her – can we issue a 2019 receipt to her?  It won't matter though if the IRA administrator doesn't recognize it as her RMD, correct? She will have penalties.

     

    Thanks from a newbie,

     

     

    Aimee S. Fitzgerald, MLIS

    Interim Director, Gift Accounting

    University Advancement

    William & Mary

    asfitzgerald@wm.edu

    757-221-1196

     

    3C906D66-676C-4ECC-9499-E6D8B389E3EA

    ForTheBold.wm.edu   |  #WMForTheBold

     

     

     






  • 10.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 09:01 AM
    You will want to talk to accounting officials on this.  But essentially the money must actually leave the donors IRA account in the year they intended for it to be claimed in that year.  Which is why your donor insisted you cash the check by 12/31.

    I am NOT an authority on this but have seen donors denied a deduction as a result of missing this.  Here's a clear(ish) statement from Fidelity:


    And here's a statement from Kiplinger:

    Fidelity is one firm that does allow you to write your donation check directly to the charity, but with a few caveats. You should confirm that you aren't automatically having tax withheld, because the distribution isn't taxable, according to Maura Cassidy, vice president of retirement products for Fidelity. And you'll have to ensure the charity cashes the check before year-end if you want the QCD to also satisfy your IRA RMD.  

    I highlighted the relevant part from this article:


    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







  • 11.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 11:16 AM
    ​I've recently (today) been asked if the SECURE Act changes what we provide in our IRA letters. Based on the discussion above, I don't believe that it does.  Our letters are similar to those included earlier in this string.  If all we are required to do is confirm we received the distribution and when, and that we are a qualified charitable organization - then that is sufficient.  Regardless of the recent changes resulting from the SECURE Act and how that might impact an individual's retirement account.

    Thanks,
    Susie

    ------------------------------
    Susie Brown
    Director of Gift Administration
    University of Illinois Foundation
    smbrown1@uif.uillinois.edu
    ------------------------------



  • 12.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 11:53 AM
    The primary change SECURE made was increasing the age when distributions must start.  As long as you are not providing that kind of information to your donors (and you shouldn't) then no change is needed.

    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







  • 13.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 12:52 PM
    Thanks, John!

    ​The other part of the question I was posed this morning included whether our letters address a situation where a donor was able to add to their IRA in the same year they make a QCD - for example, an individual contributes $5K to his IRA and then makes a QCD of $25K.  Does the $5K addition reduce the value of their QCD and change how we would document that for the donor?  Would we need to provide a tax receipt for any portion that wouldn't qualify as a QCD?  My hunch is no...we are still only responsible for documenting what we received from the donor and when.  The donor and their tax accountant are responsible for whatever needs to happen come tax time. 

    Sorry for the rambling question...hopefully that makes sense!

    Susie

    ------------------------------
    Susie Brown
    Director of Gift Administration
    University of Illinois Foundation
    smbrown1@uif.uillinois.edu
    ------------------------------



  • 14.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 12:59 PM
    The question makes sense but it is really none of your concern.  When you receive an IRA distribution your only concern is to issue a receipt confirming you go it.  Whether the donor is allowed to make the distribution and how the donor handles it on their end is their concern.

    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







  • 15.  RE: Include IRA gifts on EoY Giving Summaries?

    Posted 01-15-2020 01:23 PM

    Thanks, John.  Appreciate the confirmation!

     

    Susie

     

    Susie Brown
    Director of Gift Administration
    University of Illinois Foundation
    217.300.7000  
    //  217.333-5577  //  smbrown1@uif.uillinois.edu