1099-R vs 1099-INT: Taxes, Box 7 Codes, and RMDs

A 1099-R and a 1099-INT both report income to you and the IRS, but they cover very different money. Form 1099-INT reports interest you earned from a bank, credit union, or brokerage. Form 1099-R reports money paid out of a retirement account, pension, or annuity. Interest on a 1099-INT is almost always fully taxable at your ordinary rate. A 1099-R distribution might be fully taxable, partly taxable, or completely tax-free, and the distinction depends on what kind of account it came from and a single code on the form.

What Each Form Reports

A 1099-INT comes from a financial institution and shows interest paid to you during the year. The usual sources are savings accounts, certificates of deposit, money market accounts, bonds, and U.S. Treasury securities.1Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID (01/2024) Payers must issue the form once interest hits $10 for the year. You still owe tax on smaller amounts, though. The $10 threshold controls paperwork, not liability.

A 1099-R comes from a plan administrator or custodian and documents a distribution from a retirement plan, IRA, pension, or annuity of $10 or more.2Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025) One form covers a wide range of events:

  • Regular withdrawals from a 401(k), 403(b), pension, or IRA after age 59½.
  • Early withdrawals taken before age 59½, which may carry a 10% additional tax.3Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
  • Direct rollovers from an old 401(k) to a new IRA, which generate a form even though no tax is owed.
  • Roth conversions, which create a taxable event on the converted amount.4Internal Revenue Service. Retirement Plans FAQs Regarding IRAs
  • Death benefits paid to a beneficiary.
  • Required minimum distributions.

So receiving a 1099-R does not automatically mean you owe tax. Receiving a 1099-INT almost always does.

How Each Is Taxed

Interest on a 1099-INT

Interest is taxed as ordinary income at your marginal rate, which runs as high as 37% for 2026.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 The taxable interest in Box 1 flows straight into your adjusted gross income. Two carve-outs matter:

If your total taxable interest from all sources exceeds $1,500, you also file Schedule B.

Distributions on a 1099-R

The tax treatment depends on the account type and whether the original contributions were pre-tax or after-tax:

  • Traditional IRA and 401(k) distributions are generally fully taxable. Contributions went in tax-deductible, so the IRS collects when the money comes out.
  • Qualified Roth IRA and Roth 401(k) distributions are completely tax-free. You already paid tax on the contributions. To qualify, the account must have been open at least five years and you must be at least 59½ (or meet a limited exception such as disability).
  • Accounts holding after-tax (non-deductible) contributions produce partially taxable distributions. Only the earnings are taxed; the return of your own basis comes back tax-free.

Figuring the tax-free portion of a partially taxable distribution requires either the Simplified Method or the General Rule, both explained in IRS Publication 575.7Internal Revenue Service. Publication 575 (2025), Pension and Annuity Income IRA distributions go on Form 1040 lines 4a and 4b. Pension and annuity distributions go on lines 5a and 5b. There is no equivalent basis-tracking exercise with a 1099-INT; interest is either taxable or exempt.

Box 7: The Code That Changes Everything on a 1099-R

The single-digit distribution code in Box 7 tells the IRS what kind of transaction occurred and whether to expect additional tax.2Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025) A few of the most common codes:

  • Code 1 — Early distribution, no known exception. You took money out before 59½ and the payer did not apply an exception. The IRS will look for the 10% penalty. If you qualify for an exception (first-time home purchase, disability, and others), you claim it on Form 5329.3Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
  • Code 2 — Early distribution, exception applies. The payer knows an exception applies, such as separation from service at age 55 or older, or a Roth conversion.
  • Code 4 — Death. The payment went to a beneficiary. This applies regardless of the deceased’s age.
  • Code 7 — Normal distribution. A standard withdrawal at 59½ or older. No early withdrawal penalty.
  • Code G — Direct rollover. The money moved directly from one eligible plan to another. Box 2a should show zero and no tax is owed.

Box 2a shows the taxable amount. For a fully taxable traditional IRA withdrawal, Box 2a matches Box 1. For a rollover, it should be zero. If the payer checks the “Taxable amount not determined” box in 2b, you calculate the taxable portion yourself.

If the Box 7 code looks wrong (for example, you are coded as “1” after leaving your job at age 56 and should qualify for the age-55 exception), ask the plan administrator for a corrected form. Otherwise the IRS will assess the 10% penalty and you will have to argue it back on Form 5329.

Things That Apply to One Form but Not the Other

Net Investment Income Tax

Higher earners face an additional 3.8% net investment income tax when modified AGI exceeds $200,000 (single), $250,000 (married filing jointly), or $125,000 (married filing separately).8Internal Revenue Service. Topic No. 559, Net Investment Income Tax Interest reported on a 1099-INT counts as net investment income and is subject to the surtax above those thresholds. Most retirement distributions reported on a 1099-R are not classified as net investment income and escape the 3.8% tax, though they do raise AGI and can push other investment income over the line.

Required Minimum Distributions

Starting at age 73, you must take required minimum distributions from most retirement accounts, including traditional IRAs, 401(k)s, and 403(b)s. Each one generates a 1099-R. Roth IRAs are the exception during the original owner’s lifetime. The first RMD is due by April 1 of the year after you turn 73; every one after that is due December 31. Delay the first and you take two in the same calendar year, both taxable. Miss an RMD and the excise tax is 25% of the shortfall, dropping to 10% if corrected within two years.9Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) None of this applies to a 1099-INT. Savings accounts and CDs have no forced-withdrawal clock.

If a Form Is Wrong, Missing, or You Ignore It

If your 1099-INT or 1099-R has not arrived by early February, contact the payer. If it still hasn’t arrived by the end of February, call the IRS at 800-829-1040. The IRS will reach out to the payer and send you Form 4852, a substitute you can use to estimate the amounts and file on time, then amend later if the real form shows different numbers.10Internal Revenue Service. Topic No. 154, Form W-2 and Form 1099-R (What to Do if Incorrect or Not Received) If a form has errors, request a corrected version from the payer. Corrected forms carry a checkbox in the “CORRECTED” field at the top.

Ignoring a 1099 is the easiest way to trigger an IRS notice. The agency matches every information return against your tax return, and the accuracy-related penalty for negligence is 20% of the underpaid tax attributable to the unreported income.11Internal Revenue Service. Accuracy-Related Penalty The IRS specifically names “not including income on your tax return that was shown in an information return, like income reported on Form 1099” as an example of negligence. The rule applies equally to a forgotten CD interest payment and a missed retirement distribution. Report every form you receive. If the income is not taxable (a rollover, a return of basis, tax-exempt bond interest), there is a line on the return to show that. The problem is silence.