Ask Liz Weston

Get smart with your money

Taxes

Q&A: Electronic tax payments don’t require paper forms

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Dear Liz: You recently answered a reader whose check to the U.S. Treasury had been stolen and forged to another recipient. You suggested sending electronic checks instead. However, our accountant gives us forms that I thought needed to be included with a paper check to ensure the correct accounting of our taxes. Can we just send a check from our bank with the last four digits of our SSNs in the memo field?

Answer: It’s unfortunate your accountant hasn’t walked you through the relatively simple process of paying your taxes online. The electronic systems match your payment with your return. You only need to send in paper forms or vouchers if you’re also sending paper checks.

And you shouldn’t be sending checks in the mail if you can possibly avoid it. Given the surge in mail theft and check fraud, it really is past time to switch to electronic payments.

Q&A: How to avoid or reduce taxes on required minimum distributions

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Dear Liz: I’m confused about required minimum distributions from my retirement accounts. I’d like to avoid taxes on my withdrawals, but it seems there is no way to avoid them. Please give me some guidance.

Answer: If you got a deduction for contributing this money, and you want to keep the funds you’re required to withdraw, then yes, you have to pay taxes on these distributions.

Required minimum distributions from retirement accounts currently have to start at age 73. There are a few exceptions. Roth accounts don’t offer deductions on contributions and also don’t have RMDs. You can postpone RMDs from a workplace plan such as a 401(k) or 403(b) as long as you’re still working for the employer that sponsors the plan, the plan offers this “still working” option, and you don’t own 5% or more of the company.

If you don’t need the money, you could consider donating your required minimum distribution to charity. Known as “qualified charitable distributions,” these donations can start as early as age 70½. As long as the money goes directly from an IRA to a qualified nonprofit, you can avoid paying taxes on the distribution. For 2025, the maximum qualified charitable distribution is $108,000 per individual. (You can’t make a qualified charitable distribution from a workplace plan, but you can roll some or all of the account into an IRA and make the donation from there.)

Sometimes RMDs can be large enough to catapult savers into a higher tax bracket and trigger higher Medicare premiums. If that’s the case, and you’re still a few years away from starting RMDs, consider talking to a tax pro about ways to manage the tax bill. Starting distributions early or converting some funds to a Roth IRA might be options.

Q&A: How do I claim fire-damage losses on my taxes?

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Dear Liz: My home in Pacific Palisades is still standing after January’s fire, but was damaged by smoke and ash. The remediators deemed hundreds of personal property items unsalvageable. Our insurance company is paying us a highly depreciated amount for these items, with the full amount to be received upon the actual purchase of each replacement.

Since we won’t replace every item, we’ll end up with a sizable loss, which I understand can be claimed on our 2024 or 2025 tax return. I’m concerned that we won’t know the total amount of loss by the end of 2025. Could you please discuss how to handle this?

Answer: Casualty losses are deductible in the year you sustained the loss. That’s typically the year the loss occurred, although you may be able to deduct the loss in the previous tax year when it’s part of a federally declared disaster, such as the January 2025 wildfires in Los Angeles, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

However, you aren’t considered to have sustained a loss if there remains a reasonable prospect of recovery through a claim for reimbursement, Luscombe says. You can’t take the deduction until the tax year in which you can determine with reasonable certainty whether or not you will receive such reimbursement.

If you won’t know the amount of the loss by the end of 2025 due to this uncertainty, you can wait to deduct the loss until the year in which the amount of reimbursement is known, Luscombe says.

For personal use property, the deductible loss is the lesser of the adjusted basis of the property (typically its cost) or the decrease in the fair market value of the property as a result of the casualty (which may be determined by an appraisal or the cost of repairing the property), Luscombe says.

Q&A: Follow the rules for IRA donations

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Dear Liz: Hello. I’d like to use my IRA for charitable donations when I’m required to make minimum distributions. The problem I’ve encountered is that I want to use a debit card for donations. I prefer to donate to small art organizations, which are set up for online donations and definitely not paper checks. I found one brokerage that offers an IRA with a debit card but when I spoke with them, they said it can’t be used for charitable donations. I’m at a loss. Do you know of any way to make charitable donations from my IRA with a debit card? It’s 2025! Surely someone has figured this out.

Answer: You’ve missed a key component of how this particular tax break works.

Qualified charitable distributions allow people 70½ and older to donate money from their IRAs directly to charity, without the money being taxed. The donations can count toward the required minimum distributions that must otherwise begin at age 73 (or 75 for those born in 1960 and later).

Note the word “directly.” The transfers must go straight from the IRA to the charity, without passing through your hands. The IRA custodian will be the one to send the money, either through electronic transfer or check.