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Remember that tune?  I want to take this week’s offering to make a M.O.U.S.E. out of each of you!

M.O.U.S.E., you say. Why M.O.U.S.E.?

In my twisted mind, M.O.U.S.E. stands for






If you decide to join our little club you just need to commit yourself to be an educator of your clients, especially in today’s rapidly changing tax law world.

Nowhere is this understanding more important than in the 2021 world of Required Minimum Distributions (RMDs) and Qualified Charitable Distributions (QCDs).

Let’s begin with a little history lesson. Once upon a time (2020 to be exact) in a response to the COVID-19 pandemic, the US Congress passed a law which gave the citizenry of our land a break from RMDs. But in addition to this break also came a change as to when people need to begin RMDs. Also, there were changes as to how long people can contribute to IRAs.

That’s where M.O.U.S.E. comes in.

Consider what group our IRA taxpayers belong to.

The Taxpayer Who was at least Age 70 ½ on December 31, 2019

    • While this group was relieved of RMD requirements in 2020, the requirements are back in 2021. In planning with these taxpayers make certain they meet their RMD requirements by December 31, 2021. In planning with them by reviewing their 2020 returns, remember there is likely no RMD shown on the 2020 return so consider that fact in your 2021 year-end planning (thanks Bob Rhea for that tidbit).

Note. Just a reminder that you may have clients who took RMDs in 2020. That’s no problem; they just didn’t have to take that RMD in 2020. It’s also too late now to put it back.

    • Planning alternatives for this age group

Note. Pay special attention to this rule. Many of our “mousers” think the QCD is limited annually to the RMD amount. $100,000 is the limit, per year and must be a direct trustee-to-charity distribution.

        • The QCD is not included in the gross income of the taxpayer.
        • The QCD counts against the RMD for the year.
        • QCDs do not also qualify for a charitable deduction.

Note. With the nearly doubled standard deduction provided under TCJA, this is a powerful planning tool since most taxpayers will not benefit from direct charitable contributions anyway. Think about the impact not having to include that RMD in gross income might have on items such as taxable Social Security, Medicare premiums, deductible medical expenses, education expenses, AGI driven tax credits, etc.

IRA Contributions Allowed for those Age 70 ½ and Older

    • The new law also provides for working taxpayers who are at least age 70 ½ the ability to continue IRA contributions (for 2020 and later) even though they are subject to RMD rules. You can therefore have a client who is contributing as well as needing to make required withdrawals at the same time.

Post-Age 70 ½ Contribution Impact on QCDs

    • Taxpayers who continue to contribute to IRAs after age 70 ½ and wish to do QCDs must not include the post-age 70 ½ contributions in their QCD decisions. In short, those contributions made after age 70 ½ don’t qualify for a QCD.

The Taxpayer Who was Under Age 70 ½ on December 31, 2019

    • The SECURE ACT changed the RMD age for this group of taxpayers to age 72. So again, while RMDs were eliminated for all taxpayers in 2020, you will have taxpayers in this group who need to make 2021 RMDs. If your client turned age 72 in 2020, they were not required to make their first RMD by Apr. 1, 2021. They have until Dec. 31, 2021 to make that first RMD. Two withdrawals are not required in 2021.

Note. No start-and-stop. The law change to age 72 had no impact on our first group (the folks who were age 70 ½ or older before December 31, 2019)

    • Planning Alternatives for this age group
        • QCDs? Yep, up to $100,000 per year
        • Still contribute to IRAs if working? Yep
        • Post-Age 72 IRA contributions not eligible for QCD? Yep again

The Inherited IRA Beneficiary (for a decedent on or before December 31, 2019)

    • Like the 70 ½ or older group, no 2020 RMDs were required. In 2021, however, RMDs are back for this group as well. These taxpayers fell under the rules for stretching IRAs and were not impacted other than the RMD waiver for 2020. This group also does not qualify for QCDs if under age 70 ½ even though an RMD requirement may exist.

The Inherited IRA Beneficiary (for a decedent after December 31, 2019)

Well, this group really needs your M.O.U.S.E. abilities since we have new definitions:

    • Eligible Designated Beneficiary (EDBs)
        • surviving spouse,
        • disabled or chronically ill individual,
        • a beneficiary who is not more than 10 years younger than the IRA owner, or a
        • child of the IRA owner who has not reached the age of majority.
        • certain trusts named as an IRA beneficiary may also be considered EDBs.

These persons, in essence, still have the stretch rules which allow them to take distributions over their life expectancy, single life expectancy or follow the 10-year rule. No one is prevented from just taking a lump sum which appears to happen often. Spouses in this group can choose to treat the inherited IRA as their own.

    • Designated Beneficiary
        • A non-spouse who isn’t an EDB
        • Distributions must be taken out using the 10-year rule (distributions don’t have to occur each year but must be made by the end of the 10th year after death)
    • Not a Designated Beneficiary or Eligible Designated Beneficiary
        • Could be a trust
        • Non-persons such as charities, estates, or charities
        • Assets must be distributed within 5 years
        • If the decedent was already in RMD years, payments must at least continue using the decedent’s single life expectancy (or be withdrawn more quickly such as a lump sum).

Phew! Worn out yet? Imagine how our clients feel when they call you with “a quick question” about IRAs.

The moral of the story this week is to not have your clients miss their 2021 RMDs and to offer them perhaps a better M.O.U.S.E. tax trap. The bait is set—the question remains–will your client bite or be bitten?

Stay thirsty for knowledge fellow mousers!

By Tom O’Saben, EA

Disclaimer: The information referenced in Tax School’s blog is accurate at the date of publication. You may contact if you have more up-to-date, supported information and we will create an addendum.

University of Illinois Tax School is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. This blog and the information contained herein does not constitute tax client advice.

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