New 1099-R Coding for QCD's

[TaxGuyBill]

So if the money was not paid to the IRA account owner, nor to another IRA custodian, nor to the IRS or some other government agency under a court order, then it's pretty clear it's a QCD,

If I have an IRA-checkbook and I write the check to Rapid Robert, are you saying they should assume it is an QCD? Or do you assume that the bank should research if Rapid Robert is a 501(c)(3)? Or what if I write the check to 'My Bank' - does the IRA custodian know if I deposited it into my personal bank account or if it deposited it into a rollover IRA account?

In my opinion, the IRA custodian should NOT assume any of those and should be treated as a taxable/non-rollover distribution. It should still be an option for the taxpayer to state if it was a qualifying QCD or not.

[Rapid Robert]

If I have an IRA-checkbook and I write the check to Rapid Robert, are you saying they should assume it is an QCD?

That's like asking, if I enter an amount on Line 11 of Schedule A, should the IRS assume it is a deductible charitable contribution? The return is signed under penalty of perjury, and the IRS has its inscrutable methods for determining when to make the taxpayer prove something they swore was true, whether it's a QCD or an itemized deduction.

This tangential discussion is a lot of overkill for what is a subset of all QCDs, and I doubt either of us knows what percent of all QCDs are made by paper check written by the owner (not the custodian). Even if the "paper check" method turns out to be problematic, what about everyone else, who request QCDs online or using a request form with their custodian, not via paper check? Do you think the code Y will play a role for those people? (a sincere question).

Someone mentioned, and I think it's true, that the agreement is that the IRA paper checks will only be used for QCDs, nothing else. Incidentally I have researched Fidelity and JP Morgan as two examples, and while both allow the IRA owner to request them to send the QCD check on the owner's behalf, they do not ask for the EIN of the payee and I suspect make no effort at all to determine the type of entity to which they make the payment. As the well-known CYA language for these institutions goes, "see your tax professional for information about the tax implications of your actions". They will wash their hands of it, and rightly so.

In my opinion, the IRA custodian should NOT assume any of those and should be treated as a taxable/non-rollover distribution. It should still be an option for the taxpayer to state if it was a qualifying QCD or not.

OK, so you are in the camp that believes the code Y is completely useless and no one should care if it's present or not. That may well turn out to be true, since the IRS has not provided further guidance (at least not to the public) as to exactly what the code Y connotes and whether it applies to all or part of the distribution.

[TaxGuyBill]

That's like asking, if I enter an amount on Line 11 of Schedule A, should the IRS assume it is a deductible charitable contribution?


OK, so you are in the camp that believes the code Y is completely useless and no one should care if it's present or not..

Maybe we are looking at the topic completely differently, because your Schedule A analogy seems completely off from how I'm viewing it. Entering something on Schedule A is the taxpayer specifically stating something; that the opposite of IRA custodian or IRS automatically assuming a QCD without the taxpayer stating such a thing.


I wouldn't say useless, but it isn't a cure-all. But just informational, like code "G" for direct rollover. The IRA custodian puts code "G" in for a rollover that they KNOW is a rollover, but the taxpayer can roll it over outside of the custodial and still report the rollover on the tax return. Similarly, the IRA custodial puts code "Y" in for something that they KNOW is a QCD, but taxpayer should still be able to report a QCD that was not done directly by the IRA custodial (such as through an IRA-checkbook).


Interestingly, the Draft 1099-R Instructions that were posted today state that code "Y" is optional for 2026.

https://www.irs.gov/pub/irs-dft/i1099r--dft.pdf