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https://www.irs.gov/pub/irs-dft/i1099r–dft.pdf
Thanks to HD for fixing the problem in the link.
On April 15, 2025 the IRS issued draft instructions for the 2025 version of form 1099-R with a new box 7 code of “Y” to indicate the distribution is a qualified charitable distribution (QCD).
A good addition in my opinion.
So glad to see this. My little side hustle j.o.b. includes a few conversations every year helping IRA age RMD folks distinguish between the QCD and the regular charitable contributions made in part from RMDs. They’re shocked to find out it’s not what they thought it was.
I agree that adding the QCD code is a good thing.The other issue I have run into almost every tax year is when our client provides us with a contemporaneous written acknowledgment (CWA) that fails to meet one or more of the IRS required acknowledgement factors. The most common CWA deficiency I see is usually when a small charitable organization or church does not include “A Statement Regarding Whether or not Any Goods or Services were Provided in Exchange for the Contribution“. If a proper CWA is not received by the earlier of the due date or when the return is filed the taxpayer cannot cure the deficiency by later getting a proper acknowledgement. For those making large QCD’s getting a timely CWA is a compliance must do in my thinking.
Bill, thanks for the alert.
We’re planning to do our first QCDs this year, so this is welcome news in my book.
My expectation is if you take both a QCD and other distributions from the same IRA in 2025 that you will receive two 1099-R’s, one with code Y for QCD and one for normal distributions.
How would the IRA custodian know what the IRA distributions were for? We have IRA check-writing and could use these for any purpose but currently only use for QCDs. Our IRA custodian (Schwab) is out of the loop on this.
Great question. I did a quick look at the draft 2025 1099-R instructions from the IRS and I did not find any commentary for people with IRA qualified charitable distributions paid via IRA owner generated checks to the charity. This could create a real headache for you.
Given the draft 2025 instructions have been out only 11 days I doubt that Schwab or any other broker that grants check writing privileges for QCDs has addressed this issue to date.
Until this issue is addressed by both Schwab and the IRS I think the prudent course of action is to not use such checks to make QCDs. I think using IRA demand checks for QCDs in 2025 has the potential for unintended negative tax consequences.
Unfortunately I would not expect the issue you raise to be addressed quickly. I would hope the IRS would allow taxpayers to continue to self report QCDs in 2025 that do not have a “Y” coding on 1099-R. If the IRS does not continue to allow self reporting of QCDs I do not know if or when brokers will have a work-a-round procedure.
Sorry I can not offer more information at this time.
Thanks!
By the way, in the link to the IRS 1099r draft document the i1099r–dft.pdf file name was displayed using a single long dash instead of two short dashes, or it appeared this way on my browser screen.
The – – is how I copied & pasted the link but it is not how it it is being displayed. I have tried both replacing the entire link and editing. When I am in the edit mode the – – appears but the comment continues to be a single long dash. I do not know what I do not know on how to fix the issue. Same on this reply I have added a space to explain the issue. I will add a comment to the original post.
Can anyone help?
Bill: I fixed it for you. In future, try pasting the hyperlink into your Forum post, and then highlight it and click on the editing symbol that looks like a double helix. That should turn the hyperlink into a live link. I then like to specify that the linked page opens in a new window.
Will do. Thank you.
Thanks, Bill. We are not old enough yet for QCD, but this is good to know. I am surprised there wasn’t a box for this before. Chris
Reading your comment made me think of events in 2015 when I had bought the original book Get What’s Yours written by Kotlikoff, Moeller and Solman. They had written a guide about the benefits of using file and suspend in claiming social security. The popular book became a best seller and it was not long until the law was changed to kill most of those claiming strategies. A revised version of the book was later issued after the law changed. I hope that the same fate does not await users of QCDs.
My guess is that adding the new 1099-R code was driven more by Treasury wanting to interject a third party in reporting on qualified charitable distributions rather than to make claiming the QCD more transparent and less complex.
Bill, we are at the peak of the baby boom, so, of course they changed the file and suspend before we could take advantage. We were definitely going to do it. Hopefully QCD won’t go away either, we tithe and are planning to use it if still available. Chris
Great news. It’s about time!
LOL, only a tax nerd like me could be excited by such news as a new code in box 12.
Assume you meant box 7? Not much to get excited about box 12 or 14.
It’s a fun club to belong to and the celebration party every April 15 never fails to entertain.
Where’s my invitation?
Bill, thanks for this. It’s good to see this update. It occurred to me that in 7 years of AARP TaxAide I’m not sure I’ve seen a QCD. I guess that speaks to the type of clients served.
Your past articles about the average income of users of TaxAide where you volunteer your time and tax knowledge indicates to me a high likelihood of potential smaller tax savings benefit, if any benefit at all, from using QCDs to lower taxable income.
Lack of knowledge or lower income do you think?
I would guess lower income for most, but a lack of knowledge is quite reasonable if you have limited qualified assets. Most of the charitable contributions I see are very modest. I’ve also observed that many seniors have been conditioned to think that their charitable contributions no longer “count” due to the tax code changes in 2017. Many still bring in charitable contributions info, but state “I know this doesn’t count anymore”. Some of them might benefit from using a QCD for their donations, but we are cautioned against providing financial planning advice. We also generally don’t see IRA account balances, just 1099s. Sometimes you can make a good estimate of their value.
I would think both factors and I would add where they hold their IRA. The big brokers are great, some smaller banks where the IRA asset(s) are a CD may require a little more work.