Q: I’m starting to receive some 2022 tax documents. I’m really confused about my IRA distributions, as shown on Form 1099-R. I donated money to charity directly from my IRA believing those distributions wouldn’t count as taxable income. But, looking over my IRA’s 1099-R, it appears my donations were taxable distributions, nonetheless. Did my brokerage firm make a mistake or did I do something wrong?
A: No, the brokerage firm didn’t make a mistake. And, no, you didn’t make a mistake. Form 1099-R is simply a summary of all of the money that came out of your IRA last year. Brokerage firms include a tally of every dollar that left your IRA, regardless of whether it was a charitable donation or not.
Why aren’t your donation checks subtracted out? Because brokerage firms aren’t in the business of verifying whether you gave to a “qualified” charity or not. This leaves it up to you or your tax preparer to subtract your qualified charitable donations, or QCDs, from your total distributions as shown on your Form 1099-R.