The subject of having multiple traditional (tax-deferred) IRA accounts came up recently in a presentation I was giving on QCDs. The context was donating IRA money to charity after age 73 during the IRA's required minimum distribution (RMD) phase. (By the way, if you would like to be invited to in-person or online presentations, be sure to check juliejason.com/events, or write to me at readers@juliejason.com.)

A related question about multiple IRAs came to me from a reader ("Hank"), age 75, who has five traditional IRAs that he would like to consolidate.

While I don't have statistics on the prevalence of multiple traditional IRAs, in my personal experience working with families for over 30 years, I do see multiple IRAs. For example, when you're in your working years, you might set up a separate IRA to capture assets transferred from a 401(k) when you change jobs. Or you could have a separate IRA to house precious metals (only certain IRA custodians offer custody of precious metals). Or you could have inherited an IRA, which cannot be combined with your own IRA (with an exception for spouses).

But, beyond that, I'll always question the rationale behind having multiple traditional IRA accounts. One answer could be diversification, which usually means having accounts at multiple brokerage firms that might offer different levels of service or different investment products -- all potentially good reasons when you are below RMD age.

After reaching age 73, a complication arises. Each year, a mandated dollar amount must be withdrawn from your traditional IRAs to satisfy RMDs.

RMDs are based on the previous year's Dec. 31 values of the retirement accounts (see IRS webpage "Retirement plan and IRA required minimum distributions FAQs" at tinyurl.com/y9wajm4z).

Question 4 on the IRS FAQs page asks, "How is the amount of the required minimum distribution calculated?" The answer: "Generally, a RMD is calculated for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor that the IRS publishes in Tables in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)."

The life expectancy tables include Table I (single life expectancy), Table II (joint and last survivor life expectancy) and the most-used table, Table III (uniform lifetime).

Assume that on Dec. 31, 2024, Hank had four IRAs totaling $1 million. When he looks up the amount he needs to take in RMDs for 2025, he finds that the divisor for his age (75) is 24.6 (in Table III). That means he will need to take RMDs totaling about $41,000 in 2025, using the RMD calculator at Investor.gov (tinyurl.com/4et8e684).

According to the answer to Question 5 on the IRS FAQs page, "An IRA owner must calculate the RMD separately for each IRA they own but can withdraw the total amount from one or more of the IRAs."

Hank is free to take this total amount from any one of his IRAs or to spread the RMD among his IRAs. (By the way, this does not apply to 401(k)s -- each 401(k) has a separate RMD requirement. Read more about this rule in "Required Minimum Distributions: Know Your Deadlines" at the FINRA website -- tinyurl.com/27k846uz.)

Once taken, the RMDs are taxable as income. The answer to IRS FAQs Question 11 states "The account owner is taxed at their income tax rate on the amount of the withdrawn RMD. However, to the extent the RMD is a return of basis or is a qualified distribution from a Roth IRA, it is tax free."

Upon reaching RMD age, amounts and timing both have to be managed to avoid tax penalties (25% of the amount that was not timely withdrawn). If there is a desire to donate RMD money to charity through a QCD, that's another layer of recordkeeping. And, eventually, those IRAs and RMDs will transfer to beneficiaries, whose interests should also be considered. That leads to favoring consolidation in many situations.

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We’re quickly closing in on the end of the year, which means it’s time to make sure that required minimum distributions (RMDs) from tax-deferred accounts are taken care of.

It’s also the time to reflect on worthy causes and, with a sense of gratitude, review how you might support them. Put the two thoughts together and you have perfect dance partners: Bringing together charitable causes and RMDs through QCDs (qualified charitable distributions).

While we’ve talked about QCDs before, the topic continues to generate interest. QCDs can be used to benefit both charity and the IRA owner. If the IRA owner is in RMD stage, he can arrange to pay all or part of the RMD directly to the charity to avoid taxes on the withdrawal. (The maximum QCD for 2025 is $108,000 per IRA owner).

The question I’m addressing today came from “Joe,” a 75-year-old individual who actually organized a brand-new public charity that I’ll call “ABC Charity.” As a public charity, ABC will raise funds from public sources to pay bills. Can the founder also contribute with his own QCD?

Attorney Leonard Calbo, a partner at Connecticut-based Smolin, Calbo, Davidson, and Associates, LLC, said, “I suppose the IRS could disallow it by saying the donor received an inherent benefit since it went to a public charity set up by the donor, but I think that is a stretch.”

In these potentially tricky situations, it’s wise to go back to basics. For guidance, let’s run through what the IRS provides us, starting with IRS Publication 590-B (tinyurl.com/td2dbtdx):

“A QCD is generally a nontaxable distribution made directly by the trustee of your IRA (other than an ongoing SEP or SIMPLE IRA) to an organization …”

So, the QCD must be made directly by the trustee of the IRA to the organization -- Joe will call his IRA trustee (custodian) to arrange it.

“… eligible to receive tax-deductible contributions.” The IRS Tax Exempt Organization Search (tinyurl.com/48y7pz64) allows you to find organizations that have a 501(c)(3) designation, meaning they are eligible to receive tax-deductible contributions. ABC Charity has a 501(c)(3) designation.

“You must be at least age 70 1/2 when the distribution was made.” Not a problem, since Joe is 75. If he had not yet reached age 73 (the current age for requiring RMDs for IRA owners) but was older than 70 1/2, he could still make the QCD.

Another requirement? The charity must acknowledge the receipt of the QCD in writing, noting ng the amount received, the date, and that no goods or services were provided in exchange for the donation.

That can be a potential sticking point depending on the circumstances. In IRS Publication 526, “Charitable Contributions” (tinyurl.com/t7et2eyd), is “Contributions From Which You Benefit,” which states: “If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you can't deduct the part of the contribution that represents the value of the benefit you receive.”

This would apply if Joe received goods or services in exchange for the QCD. But here, Joe is doing the opposite. He is not only donating money, but also his time and knowledge to further the mission without pay.

Is there some way that a founder benefits beyond the benefit every taxpayer receives when making a QCD (tax savings) just because he is the founder?

Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting, believes the answer is “no.” “The founder of a charity that is considered a qualified 501(c)(3) charity by the IRS can make a (QCD) to the charity provided that the founder receives no personal benefit from the contributed funds (other than the tax exclusion), the charity is a qualified 501(c)(3) charity, and the transfer was made directly from the IRA administrator to the qualified charity.”

Again, be sure to confirm the answer with your accountant or attorney. In and of itself, the fact that the donor is the founder of a public charity does not end the discussion. It all depends on whether there are financial or economic benefits.

On Nov. 5, I’m giving an in-person presentation on QCDs at Greenwich Library. For more information, go to juliejason.com/events/upcoming-events.

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Do you remember your very first tax return? If you filed that return before the World Wide Web arrived on the scene (1993), perhaps you talked with your parents or older siblings to learn what to do.

Now, life is very different. In today's world, you might turn to online resources for help.

But first things first: Do you have to file a tax return?

To find out, go to the IRS webpage "Check if you need to file a tax return" (tinyurl.com/4pu4ct2n) and look for "Who must file."

You'll see a list of three items, one of which is a very low dollar amount: "You have over $400 in net earnings from self-employment (side jobs or other independent work)."

You might find that odd in light of a second, much higher dollar amount that refers to income being "over the filing requirement" ($15,750 for a single filer for 2025 -- tinyurl.com/mu79d76e).

The difference has to do with how the money was earned. (See the Filing Information and Standard Deduction chapters of IRS Publication 17, "Your Federal Income Tax" -- tinyurl.com/bdfcrhjn).

To best understand how these different amounts may apply to you, try out the Interactive Tax Assistant (ITA) tool, which is found on the IRS webpage "Do I need to file a tax return?" (tinyurl.com/2jv5mv8s).

Using the ITA tool, compare Jimmy to Mike. Jimmy earned $500 working at a coffee shop. His employer will report his earnings on a W-2. Mike earned $500 doing odd jobs for a neighbor, with no W-2.

Jimmy has "earned income" of $500, far below the filing threshold of $15,750; he does not have to file.

"[E]arned income is the salaries, wages, tips, professional fees, and other amounts you receive as pay for work you actually perform," according to the ITA.

Mike does not have W-2 income. His earnings are from "self-employment." The ITA asks: "In 2024, did you have net earnings from self-employment of at least $400?" Because he earned $500, he does have to file a tax return and he will be required to pay roughly $70 in self-employment taxes (see the NerdWallet article "Self-Employment Tax: What It Is, How to Calculate in 2025 and 2026" -- tinyurl.com/39ew36zj). However, he will not have to pay income taxes, since his income is less than the federal taxable threshold of about $14,600 for a single filer.

Mike's earnings fall under the term "gig work," which is described at the IRS webpage "Manage taxes for your gig work" (tinyurl.com/mpu56edj).

Let's assume that you have to file a tax return. Given that we're a few months away from the end of the calendar year, the best you can do right now is to estimate your earnings to get ready for the actual tax filing in early 2026.

You'll finalize the return after you receive your W-2s, 1099s and other tax forms that report other types of income early in 2026. A W-2 is a wage and tax statement issued by an employer; 1099s report non-employee payments (freelance or gig work, interest payments, and so on).

Think about filing your return electronically to take advantage of the step-by-step process online programs take you through. If you do file electronically, and a tax refund is due, you will get your refund faster -- "usually in less than 21 days," according to the IRS (tinyurl.com/53y2urzm).

The IRS Free File program is one option. But you have to be below certain income thresholds (about $84,000) to qualify for a free filing (tinyurl.com/yu8vbbn6).

For additional resources, read the Bank of America Better Money Habits article "6 steps for first-time tax filers" that points out that "[f]iling your own taxes is a key milestone" (tinyurl.com/yvv4rcd6). Indeed it is.

Also check out the TurboTax article "5 Tips for How to File Taxes for the First Time" (tinyurl.com/2wpwbnfb).

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