What Is Form 1099-R? Box 7 Codes, Rollovers, and Penalties

Form 1099-R is the tax document a plan administrator or financial institution sends you when money comes out of a retirement account, pension, annuity, or similar tax-advantaged plan. Any distribution of $10 or more in a calendar year produces one, and your copy should arrive by early February so you can use its numbers on your return.¹ The IRS gets its own copy directly from the payer, so any mismatch between your return and what’s on the form will almost certainly generate a notice.

What Kinds of Payments Trigger a 1099-R

The form covers more accounts than most people expect. Traditional and Roth IRAs, 401(k) and 403(b) plans, governmental 457(b) plans, profit-sharing plans, pensions, and survivor benefit annuities all produce a 1099-R when money goes out.² Insurance contracts, charitable gift annuities, and disability payments from a retirement plan also trigger one. The common thread: the money originated inside a tax-sheltered vehicle, and the government wants a record that it left.

The $10 threshold is deliberately low. Whether you took a full lump sum or a modest monthly pension check, if the total for the year reached $10, you’ll get the form.¹ Rollovers between retirement accounts generate a 1099-R too, even though tax usually isn’t owed on them.

Reading the Boxes That Matter

Most of the important information sits in a handful of numbered boxes.

Box 1 is the gross distribution: the total that left the account before any taxes were withheld. It includes rollovers, conversions, and recharacterized contributions, not just cash you actually pocketed.²
Box 2a is the taxable amount, meaning the portion the IRS considers income. If you made after-tax contributions to the plan, Box 2a will usually be lower than Box 1. For Roth IRA distributions, payers often leave this blank because figuring the taxable amount is your responsibility.³
Box 4 shows federal income tax already withheld by the payer. It acts as a credit on your return, reducing what you owe or increasing your refund.²
Box 7 holds a distribution code, one or two characters that tell the IRS why the money came out. This single entry drives whether you owe a penalty, ordinary income tax, or nothing at all.

Boxes 14 through 19 carry state and local information: state tax withheld, the state’s name and payer ID, the state-level distribution amount, and a second state or locality if applicable.⁴ The IRS doesn’t require these fields, but your state return will use the data if it’s there.

What the Box 7 Codes Mean

Box 7 is the most consequential field on the form. Getting the code wrong, or misunderstanding it, can mean paying a penalty you don’t owe or missing one you do.

Code 1 flags an early distribution with no known exception. The payer uses it whenever you were under 59½, even if you actually qualify for an exception to the 10% early withdrawal penalty, because the payer doesn’t verify your personal circumstances. Claiming the exception is on you.²
Code 3 means the distribution was made because you became permanently and totally disabled. It exempts you from the early withdrawal penalty regardless of age.²
Code 4 means the payment went to a beneficiary, estate, or trust after the account holder died. Payers use it regardless of the deceased’s age.²
Code 7 is the normal distribution code for someone 59½ or older withdrawing under the regular rules. No additional penalty applies.²
Code G marks a direct rollover from one qualified plan to another, or from a plan to an IRA. Because the funds never passed through your hands, the transfer is generally not taxable and Box 2a should be zero.²

Roth-specific codes appear in Box 7 too. Code Q is a qualified, tax-free Roth IRA distribution. Code J is an early Roth IRA distribution with no known exception, and Code T is a Roth distribution where an exception applies. Code B covers a distribution from a designated Roth account inside an employer plan, and Code H covers a direct rollover from a designated Roth account to a Roth IRA.³

The 10% Early Withdrawal Penalty and How to Claim an Exception

Pulling money from a qualified retirement plan or IRA before 59½ normally triggers a 10% additional tax on the taxable portion, on top of regular income tax.⁵ Exceptions exist for permanent disability, unreimbursed medical expenses above a threshold, substantially equal periodic payments over life expectancy, certain emergency personal expenses, and distributions to domestic abuse victims, among others.⁶

Here’s the catch. Your 1099-R will usually show Code 1 even when you qualify for an exception, because the payer doesn’t investigate. To actually claim the exception, file Form 5329 with your return; that form lets you report the distribution, identify the exception, and exclude the qualifying amount from the penalty calculation.⁷ Skip that step and the IRS will assume the full penalty applies. It’s one of the most common and expensive filing mistakes for people under 59½ who take distributions for legitimate reasons.

If Code 1 is on your 1099-R and you do owe the full 10% with no exception, you don’t need Form 5329. You can report the additional tax directly on Schedule 2 of Form 1040.⁷

Rollovers and the 20% Withholding Trap

A direct rollover, where funds move straight from one plan to another without passing through your hands, is the cleanest transfer. Code G appears in Box 7, zero shows up in Box 2a, and no tax or penalty applies.²

An indirect rollover works differently. If you take the distribution yourself and plan to redeposit it within 60 days, the plan must withhold 20% federal income tax on the payment.⁸ The only way to avoid the withholding is to elect a direct rollover instead.

That withholding creates a cash-flow problem. Say you take a $50,000 distribution. The plan sends you $40,000 and forwards $10,000 to the IRS. To complete a tax-free rollover, you have to deposit the full $50,000 into a qualifying account within 60 days, which means covering the missing $10,000 from other savings. Deposit only the $40,000 you received and the remaining $10,000 is treated as a taxable distribution, potentially plus the 10% penalty if you’re under 59½. You’ll get the withheld amount back as a credit when you file, but you need the cash upfront. This trap catches people constantly.

How Roth Distributions Show Up

Roth IRA distributions appear on Form 1099-R like any other payout, but the tax treatment can be fundamentally different. A qualified Roth distribution, taken after reaching 59½ and satisfying the five-year holding period, is completely tax-free.⁹ Those show Code Q in Box 7.

The five-year clock starts on January 1 of the tax year you first contributed to any Roth IRA. Once that period passes and you meet one of the qualifying triggers (age 59½, disability, death, or up to $10,000 for a first home), every dollar comes out free of federal income tax and penalties.⁹

For non-qualified Roth distributions, the payer generally isn’t required to figure the taxable amount. Box 2a may be blank or show only taxable earnings on an excess contribution.³ You calculate the taxable portion on Form 8606 and attach it to your return. Ordering rules generally treat your own contributions as coming out first, then converted amounts, and finally earnings, which may be taxable and penalized if the distribution isn’t qualified.

RMDs on a 1099-R

Once you reach 73, the IRS requires minimum withdrawals each year from traditional IRAs and most employer-sponsored retirement plans.¹⁰ Those required minimum distributions show up on your 1099-R like any other withdrawal. There’s no special code or box that flags a distribution as an RMD; the form simply reports the gross and taxable amounts under the usual rules.

Missing an RMD is expensive. The excise tax on the shortfall is 25%, dropping to 10% if you catch the mistake and take the missed distribution before the end of the second year after it was due.¹¹ You report and pay the penalty on Form 5329.¹² Your first RMD can be delayed until April 1 of the year after you turn 73, but doing so means two distributions in the same calendar year, which could push you into a higher bracket.

Where the Numbers Go on Your Return

Where 1099-R data lands on Form 1040 depends on the source. IRA distributions go on lines 4a (gross amount) and 4b (taxable amount). Pension and annuity payments go on lines 5a and 5b. The IRS expects them reported separately because different rules can apply.

For the 2025 tax year, payers must deliver your 1099-R by February 2, 2026; the statutory January 31 deadline shifts because that date falls on a Saturday.¹³ When it arrives, compare every box against your own records. Mismatches between your return and what the payer reported trigger automated underreporter notices, often months after you file. Catching errors early is far less painful than answering one of those letters.

Keep your 1099-R forms for at least three years from the date you file the return that includes the distribution.¹⁴ For IRA basis records, tracking after-tax contributions, hold onto documentation until you’ve fully withdrawn the account, since you’ll need it to prove which portions aren’t taxable.

What to Do If the Form Is Wrong or Missing

If your 1099-R hasn’t arrived by early February or the numbers on it are wrong, start with the payer.¹⁵ Give them time to respond; corrections can take a few weeks, especially if your account moved between institutions.

Still nothing by the end of February? Call the IRS at 800-829-1040 with your name, address, Social Security number, and the payer’s information ready. The IRS will contact the payer on your behalf and send you Form 4852, a substitute for the missing 1099-R.¹⁶

You can use Form 4852 to file on time by estimating the distribution and withholding from your own records: account statements, year-end summaries, and deposit records all help. If the actual 1099-R later shows different numbers, file an amended return on Form 1040-X.¹⁵ Filing on time with estimates almost always beats filing late; the late-filing penalty is usually more expensive than an amendment.

1
Internal Revenue Service. About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
2
Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
3
Internal Revenue Service. Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
4
Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
5
Internal Revenue Service. Substantially Equal Periodic Payments
6
Internal Revenue Service. Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t) – Notice 2024-55
7
Internal Revenue Service. Instructions for Form 5329 (2024)
8
Office of the Law Revision Counsel. 26 U.S. Code 3405 – Special Rules for Pensions, Annuities, and Certain Other Deferred Income
9
Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)
10
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
11
Internal Revenue Service. Transition Relief and Guidance Relating to Certain Required Minimum Distributions – Notice 2023-54
12
Internal Revenue Service. About Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
13
Internal Revenue Service. General Instructions for Certain Information Returns (2025)
14
Internal Revenue Service. How Long Should I Keep Records?
15
Internal Revenue Service. Topic No. 154, Form W-2 and Form 1099-R (What to Do if Incorrect or Not Received)
16
Internal Revenue Service. About Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R