2025 1099-R - no QCD?

pisc8r
pisc8r Member Posts: 3 Newcomer
in Retirement Income

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?

Comments

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 675 image
    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
    pisc8r Member Posts: 3 Newcomer

    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
    KristineS FreeTaxUSA Agent Posts: 269 image
    edited November 18

    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
    pisc8r Member Posts: 3 Newcomer

    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
    MatthewD FreeTaxUSA Team Posts: 675 image
    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.

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