What steps should an IRA owner take to confirm a charity can accept a QCD before initiating a transfer?
Executive summary
Before instructing an IRA custodian to send money to a nonprofit, an IRA owner should confirm the charity is an eligible public charity (not a donor‑advised fund or private foundation), verify the charity can and will accept QCDs on the owner’s behalf, coordinate the transfer mechanics with the IRA custodian, and collect contemporaneous documentation because IRS rules require the transfer be direct and completed by December 31 for the tax year [1] [2] [3].
1. Verify the charity is “qualified” under tax law, not just well‑meaning
The first step is to confirm the recipient meets the IRS definition of a qualified charity—typically a 501(c) public charity or an organization that qualifies under Internal Revenue Code §170(b)(A); gifts to donor‑advised funds, supporting organizations, and private foundations generally do not qualify as QCDs [1] [2] [4]. Relying solely on a charity’s website is common but risky; cross‑check IRS listings or ask the charity to confirm its status in writing because the tax treatment hinges on that legal classification [4].
2. Ask the charity if it accepts QCDs and how it prefers to receive them
Not every charity has internal processes or staff familiar with QCDs, so an explicit conversation is essential: request the charity’s QCD instructions, whether it can accept a check made payable directly to the charity, whether it can receive electronic transfers, and whether it will provide a written acknowledgment that the gift was a QCD [5] [6]. Large institutions often publish QCD guidance and tax acknowledgement templates; faith‑based and university gift offices typically handle QCDs but will insist on specific donor information and may not accept certain QCD uses (e.g., funding donor‑advised funds or private foundations) [2] [7].
3. Coordinate mechanics with the IRA custodian—insist on a direct transfer and correct payee
The transfer must come directly from the IRA custodian to the charity (money must not pass through the donor’s hands), and the distribution check should be payable to the charitable entity to meet QCD rules; some custodians will mail the check to the charity, others will mail to the IRA owner with instructions, and some require additional paperwork or a Medallion Signature Guarantee to issue a charity‑payable check [8] [9] [5]. Clarify the custodian’s required forms, whether tax withholding will be applied (it should not be for a QCD), and whether the custodian will annotate the Form 1099‑R with the IRS “Y” code introduced for QCDs starting in 2025 [8] [10] [9].
4. Confirm timing and deadlines—start early to meet year‑end rules
A QCD must be completed by December 31 of the tax year to count for that year, and custodial processing times vary; therefore initiate the transaction well before year‑end to allow for paperwork, Medallion guarantees, or mailing delays [3] [10]. Many providers recommend beginning the QCD process by mid‑December or earlier because some custodians will not make checks payable directly to charities without extra steps that add time [8].
5. Understand exceptions, special use cases, and limits
Be aware of statutory limits and exclusions: the annual QCD cap is indexed (references show $108,000–$111,000 ranges in recent guidance) and donors cannot use QCDs to fund donor‑advised funds or most private foundations; some split‑interest gifts (CRT/CGA) may accept QCD funding under special rules but require coordination with both the charity and custodian [11] [12] [2]. For inherited IRAs and SIMPLE/SEP IRAs there are extra rules about active status and contact with funds—confirm eligibility with custodian and advisor [13] [14].
6. Document everything: acknowledgements, 1099‑R, and receipts
Obtain a contemporaneous written acknowledgement from the charity stating the amount and that no goods or services were received, keep the Form 1099‑R from the IRA custodian, and preserve any custodian confirmation that the transfer was coded as a QCD; these materials support the tax position that the distribution was excluded from income and are increasingly important with new IRS reporting [4] [10] [9]. If the charity can provide a QCD tax acknowledgement letter, request it before filing taxes [6].
7. Caveats, competing agendas, and limits of available guidance
Custodians and charities each have incentives—custodians to limit operational risk and charities to maximize donations—so procedures vary and can create friction that defeats QCD timing; mediation often requires patience and documentation from both sides [8] [5]. The sources reviewed do not provide a single standardized checklist for every institution, so taxpayers should confirm custodian‑specific forms and, if in doubt, consult a tax advisor for edge cases [8] [9].