How should taxpayers document a QCD when the custodian issues a check to the IRA owner rather than directly to the charity?
Executive summary
When an IRA custodian issues a distribution check payable to the IRA owner instead of directly to the charity, taxpayers must assemble documentary evidence to show both that the IRA distribution occurred and that the charitable organization actually received the funds — because the IRS treats QCDs as a direct transfer from custodian to charity and historically Form 1099‑R did not identify QCDs separately [1] [2]. Beginning with reporting for 2025 distributions the IRS is adding Code Y in Box 7 of Form 1099‑R to identify QCDs, which will simplify future proof, but for years before that taxpayers must rely on custodian statements, canceled checks, and charity acknowledgments [3] [4].
1. What the law requires and why a check to the owner is risky
A qualified charitable distribution must be a payment “directly from the IRA custodian to the qualified charitable organization,” and funds that are paid into the IRA owner’s hands or account generally do not qualify as a QCD — custodians and major guidance sources say direct payment is essential and a check made out to the owner or electronic distribution to the owner will not count [1] [5] [6].
2. How custodians often handle checks and the practical exception
Many custodians will make checks payable to the charity but mail them to the owner to forward, or will mail a charity‑payable check to the owner as a practical accommodation; in that situation custodians and practitioners commonly treat the check as a direct payment if the check itself is payable to the charity and the custodian’s records show the distribution — but the timing and clearing of that check still matter for year‑end treatment [7] [8] [9].
3. Documentation taxpayers should gather when the check is mailed to the IRA owner
Taxpayers should retain the Form 1099‑R showing the distribution, the original distribution request or instruction to the custodian directing the payment to the charity, a copy of the check (showing payee), communication confirming the custodian’s intent, and a contemporaneous written acknowledgment from the charity that it received and cashed the check and provided no goods or services — these items together serve as proof that the RMD was distributed and the charity received the donation [10] [8] [11].
4. Watch the calendar: cashing and reporting deadlines matter
Custodians typically count a distribution for the year only once they become aware the funds left the account (for check‑book IRAs that means when a check clears) and QCDs must be completed by December 31 to count for that tax year, so confirming that the charity cashed the check before year‑end — or that the custodian coded/recorded the payment as a QCD before December 31 — is essential to avoid missed RMD or misreporting problems [9] [1] [12].
5. How to report on the tax return for now and what’s changing
For tax years before the IRS required a specific QCD code, taxpayers reported the full IRA distribution on Form 1040 and then excluded the QCD amount per the instructions (many preparers annotate the 1040 lines to indicate the QCD), relying on the 1099‑R plus charity proof to substantiate the exclusion; beginning with 2025 distributions custodians must include Code Y in Box 7 of Form 1099‑R to identify QCDs, which will reduce reviewer friction and the chance of inadvertent taxation [7] [10] [3] [4].
6. Risks, remediation and when to get professional help
If the custodian issues the check to the IRA owner in a way that the IRS or custodian refuses to accept as a QCD, the distribution could be taxable and might not satisfy the RMD; taxpayers facing disputes over year‑end timing, coding on 1099‑R, or whether the charity’s receipt satisfies QCD rules should preserve all correspondence and consider engaging a tax professional to request corrected reporting from the custodian or to document an audit position [5] [9] [4].
7. Conflicting practices and institutional incentives to watch
Custodians sometimes prefer mailing charity‑payable checks to the owner for operational ease, but that convenience can create timing, clearing and documentation traps for donors; charities and donors also bear the burden of timely acknowledgment, and ancillary procedural hurdles such as medallion guarantees can explain why custodians route checks through owners — awareness of these incentives explains why meticulous documentation is the pragmatic defense [7] [8] [13].