New 1099-R Coding for QCD's

[RWG1950]

Will a manual QCD adjustment on the 1040 still be available for 2026 returns - as with prior years ?
For new QCD's, the mutual funds I deal with now require their own dedicated form to be used to accommodate the code "Y" on the 1099-R.
But I also have customers that had begun a monthly gifting amount several years earlier that continue & was wondering how these will be handled.
As recent as March, a phone service rep of a certain mutual fund, told me they were still using their regular IRA distribution form for QCD's.

[Rapid Robert]

Perhaps your could clarify your question. What do you mean by a "manual QCD adjustment"? Where in the form instructions can I see which items on Form 1040 are "manual" or "automatic"?

The 1099-R already has a distribution code for QCDs. I don't think mutual funds have the option to use some other info form for reporting.

If a traditional IRA distribution is not a trustee-to-trustee rollover/Roth conversion, and it is also not payable to the IRA owner, then what else could it be beside a QCD?

[Lion]

QCDs apply to IRAs only. I your client gives from his mutual fund, then it could be a Schedule A deduction.

[FEDUKE404]

I think there is some verbal confusion here.
Several of my clients routinely participate in QCDs from an IRA. I have NEVER encountered Code Y on any Form 1099-R.
In virtually all cases, SOME of the IRA distribution shown on the Form 1099-R is QCD. My software does show "a manual adjustment" on the data entry worksheet, asking what portion if any is for a QCD. I enter the QCD amount there and the taxable amount of the IRA distribution is reduced. Now also a box gets checked versus the prior"QCD" line annotation.
Perhaps if ALL of the IRA distribution is via QCD then Code Y might appear, but I have no clients who fit that category.

[RWG1950]

To clarify my original post
The manual adjustment I refer to is when the preparer enters the amount of IRA distribution as QCD on the 1099-R screen, allowing for differing amounts on lines 4-a & 4-b of the 1040.
As I understand this, the code "Y" on 1099-R will be new for QCD's in the 2026 tax year. Was wondering if no code "Y" is shown on the form, can we still show a QCD to be a QCD on the 1040.
A taxpayer can initiate ongoing monthly QCD redemptions from their mutual fund IRA - if paid by the IRA directly to their charity.

[Rapid Robert]

SOME of the IRA distribution shown on the Form 1099-R is QCD.

Perhaps if ALL of the IRA distribution is via QCD then Code Y might appear, but I have no clients who fit that category.

The instructions do not make clear whether code Y is meant to apply to the entire Box 1 amount or just some unspecified portion of it.

The only thing that makes sense is that one or more 1099-Rs would be issued for a single IRA (this is already the case in several other situations, per IRS instructions). The amount of the QCD would be on one 1099-R with code Y (newly required for 2026, optional for 2025), and any remaining amount would be on one or more separate 1099-Rs with appropriate codes.

However, there is no guarantee that the IRS did it in a way that makes sense. Smart/helpful payers will probably break out the code Y amount on a separate 1099-R. Others probably will not, which is barely any different from the way it was before and therefore pretty useless.

It is still on the taxpayer to have the required written acknowledgement for any QCD amount.

[Rapid Robert]

. Was wondering if no code "Y" is shown on the form, can we still show a QCD to be a QCD on the 1040.

I don't think so.

[New York Enrolled Agent]

I don't think so.

If the taxpayer truly did a QCD, then I would suggest that the lack of a code would not control. Substance over form would rule - a QCD is a QCD.

The IRS might question it down the road but if the taxpayer indeed did a QCD then it should be reported as such.

[Rapid Robert]

The IRS might question it down the road

Change "might" to "probably", at least for non-de minimis amounts. Otherwise, what is the purpose of adding code Y?

[FEDUKE404]

As I mentioned above, I have clients whose 2025 IRA income with all / none / some QCD amount involved. None of those Forms 1099-R showed Code Y, although my 2025 tax software DOES have that as a separate selection in the pull-down menu for Box 7.
There may be in 2026 the need for a "pure" non-QCD Form 1099-R with Code 7 and separately the need for an "all QCD" Form 1099-R with Code Y. That would seem to be a logical approach to things.
QUESTION: For anyone who has already seen a Code Y Form 1099-R, has that been the primary code, or perhaps a secondary code?

[TaxGuyBill]

Change "might" to "probably", at least for non-de minimis amounts. Otherwise, what is the purpose of adding code Y?

I'll start of with that I have NOT researched it yet to see if there is guidance ...

If the financial institution writes a check to the charitable organization, it seems likely they would always use Code Y.

But some financial institutions provide an IRA-checkbook to the taxpayer, and the taxpayer writes the check to the charitable organization. It is those situations that it seems logical to me that some may not be listed with a "Y" and would need to be manually entered as a QCD (and possibly more scrutiny from the IRS).