Take RMD with QCD and tax withholding?

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Indianrock
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Joined: Sat Jan 02, 2010 11:40 am

Take RMD with QCD and tax withholding?

Post by Indianrock »

I tried twice on Vanguard's website to do a 3-in-one transaction: Take my RMD along with a qualified charitable contribution and a specific amount of tax withholding. Picking the source/from Traditional IRA account was easy as was entering the total RMD amount. For the destination I picked our single taxable account -- these are comprised of the fund itself and a settlement fund. I believe you have to put the money in the settlement first and then it funnels itself into the mutual fund ( VTSAX in this case).
I entered the total RMD into one of those destination accounts, then the other, then both but CONTINUE wasn't working.
I'm assuming that subsequent screens would allow me to specify the QCD and tax amounts, both of which would reduce what actually goes into the taxable fund.
I may just call support today as they've handled this over the phone for me before.
If I was king: once a stock is purchased, you hold it for 30 days.
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Indianrock
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Re: Take RMD with QCD and tax withholding?

Post by Indianrock »

Made the call. Apparently you must do this in two step/transactions. First the QCD. Then the balance of your RMD to wherever that is going. In my case it was my taxable account and since dealing with dollar amounts not shares or percentages it has to go to the Vanguard Federal Money Market Fund (Settlement fund) first and then next week I'll need to move that to the actual mutual fund in the same account.
If I was king: once a stock is purchased, you hold it for 30 days.
Alan S.
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Re: Take RMD with QCD and tax withholding?

Post by Alan S. »

Indianrock wrote: Fri Oct 22, 2021 8:25 am Made the call. Apparently you must do this in two step/transactions. First the QCD. Then the balance of your RMD to wherever that is going. In my case it was my taxable account and since dealing with dollar amounts not shares or percentages it has to go to the Vanguard Federal Money Market Fund (Settlement fund) first and then next week I'll need to move that to the actual mutual fund in the same account.
Yes, trying to combine these 3 transactions into a single order would often lead to expensive mistakes, so VG's site might intentionally be set up so that cannot be done.

The QCD should be done first, but if you account for it correctly it could also be done last. But doing it first eliminates the chance that you might complete the full RMD before doing the QCD, which would erase most of the tax advantage of the QCD.

After completing the QCD, you also need to generate enough cash in the IRA to at least cover the withholding you want, but it would be simpler to generate enough for the entire remainder of the RMD as well, avoiding the hassle of doing in kind RMD distributions.
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Indianrock
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Re: Take RMD with QCD and tax withholding?

Post by Indianrock »

These figures are just examples
Total rmd=$20,000. Qcd=$5000. Tax witholding=$3000
20000-5000 =RMD remainder of $15000
$15000-$3000=$12000 to taxable account
If I was king: once a stock is purchased, you hold it for 30 days.
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