New proposed 1099R distribution code Y for QCDs
In the draft 2025 1099R Inst, the IRS has introduced a new distribution code Y to report QCDs. This means that IRA custodian would have to issue a 1099R coded Y for QCDs and another 1099R coded 7 or 4 for non QCD distributions.
The IRS has in the past chosen to allow taxpayers to report QCDs on the honor system, knowing that the use of a special distribution code would be flawed to an extent for several reasons. The IRA custodian may not know whether a QCD check was delivered on time, whether the entity was a legit charity, whether the taxpayer received the required acknowledgement, or even if the taxpayers pre tax IRA balance was less than the QCD due to IRA basis.
Therefore, it appears that the potential for QCD taxpayer fraud has finally taken priority over possible incorrect Y coded 1099R forms.
Permalink Submitted by BruceM on Fri, 2025-04-18 11:48
Alan
Thanks for the update. First I’ve heard of it. I just never realized that one could report their entire TIRA withdrawal as a QCD up to the max $105,000 (2024) and the IRA custodian wouldn’t know it. Yes, its not foolproof, but it will be much closer to being accurate than having no QCD distribution code.