2025 1099-R - no QCD?

I'm doing a test run of my 2025 taxes and noticed that the 1099-R entry never asks if I made a QCD. I'm over 70 1/2, box 2b is checked, box 7 code is 7 and IRA/SEP/SIMPLE box is checked. I won't get a 1099-R from my custodian with box 7 code Y since I write my own IRA checks and send them to the charity. Am I missing something?

Find more posts tagged with

Comments

MatthewD

Hi pisc8r,

Yes, you are missing something. Sorry. See #2 in the list below.

The requirements for a QCD are:
1. The distribution can't be from an active SEP or SIMPLE IRA. Active means when the employer has made a contribution in the current tax year (2025).
2. The distribution must be made directly from your IRA account to the charity or split-interest entity.
3. You must be at least 70 1/2 years old when the distribution was made.

So the box 7 code would be Y or Y7.

The good thing is you can still itemize the contributions, but it won't automatically be deducted from your income. Talk to your retirement account manager to see about setting up a QCD for 2026.

pisc8r

Thanks for your response. My understanding is that the IRS clarified this in IRS Notice 2007-7 Q&A #41:

Q-41. Is a check from an IRA made payable to a charitable organization described in § 408(d)(8) and delivered by the IRA owner to the charitable organization a direct payment to such organization?

A-41. Yes. If a check from an IRA is made payable to a charitable organization described in § 408(d)(8) and delivered by the IRA owner to the charitable organization,the payment to the charitable organization will be considered a direct payment by the IRA trustee to the charitable organization for purposes of § 408(d)(8)(B)(i).

Is this no longer the case?

KristineS

Hi pisc8r,

It sounds like you may have what is referred to as a "checkbook IRA."

You're correct about Notice 2007-7, Question/Answer 41 which states:

"Is a check from an IRA made payable to a charitable organization
described in § 408(d)(8) and delivered by the IRA owner to the charitable organization a direct payment to such organization?"

"Yes. If a check from an IRA is made payable to a charitable organization
described in § 408(d)(8) and delivered by the IRA owner to the charitable organization, the payment to the charitable organization will be considered a direct payment by the IRA trustee to the charitable organization for purposes of § 408(d)(8)(B)(i)."

This allows you to write a check as you mention to make a charitable donation, rather than the direct trustee to trustee transfer. So long as the IRA isn't a self-directed IRA LLC with a checkbook, which requires a trustee to trustee transfer, it's allowed.

In addition, the check must be both received and cashed by the charity before December 31st in order to qualify as a QCD distribution.

Third, assuming your payment and the charity meets all other 501(c)(3) rules, the distribution qualifies as a direct payment for the QCD designation.

At this time, FreeTaxUSA doesn't currently support the checking writing method for a QCD. We do however, hope to have this implemented in time for the 2025 filing season next year.

pisc8r

Thanks for your reply. Since the IRS has decided that the 1099-R box 7 code Y is optional for 2025 this would mean that FreeTaxUSA can't be used for all QCD's (not just checkwriting) if the custodian hasn't implemented it. I hope you will have this capability implemented in time.

MatthewD

Hi Pisc8r,

We will let you know what changes are made to the software to support a 1099-R with a CQD without a box 7, code Y.

MatthewD

Hi pisc8r,

I just wanted to inform everyone that for Tax Year 2025 when you enter a 1099-R from an IRA distribution and you are at least 70 1/2 years old, you will be asked, in the software, if part or all of it was contributed as a Qualified Charitable Donation (QCD). This will be implemented by December 12, 2025 and will be part of the 2025 software.

Going forward, you should work with your retirement administrator for help getting Code Y for your QCDs for 2026 and later years.