What Is Form 1099-R and How Do I Report It?

Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., is an information return sent by financial institutions to you and the IRS. The form reports withdrawals from these accounts, detailing the total amount, the taxable portion, and any taxes already withheld. You should receive this form by January 31st following the year of the distribution.

Common Reasons for Receiving a Form 1099-R

You will receive a Form 1099-R for several financial events involving retirement funds. These events include:

• Taking normal distributions after reaching retirement age (59½).
• Making an early withdrawal from a retirement account before age 59½.
• Executing a rollover by moving funds from one retirement account to another.
• Converting a traditional IRA to a Roth IRA.
• Taking a distribution as a beneficiary from an inherited retirement account.
• Taking a loan from certain plans, like a 401(k), that is treated as a distribution.

A Box-by-Box Guide to Form 1099-R

Box 1, labeled “Gross distribution,” shows the total amount of money paid to you from the account during the year, before any withholdings.

Box 2a, “Taxable amount,” details the portion of the gross distribution that is subject to income tax. This amount may be less than Box 1 if you made after-tax contributions to your retirement plan or if the distribution was a qualified rollover. If the payer cannot determine the taxable portion, Box 2b, “Taxable amount not determined,” will be checked, placing the responsibility on you to calculate the correct taxable income.

Box 4, “Federal income tax withheld,” shows the amount of money the payer has already sent to the IRS on your behalf. Box 5, “Employee contributions/Designated Roth contributions,” reports any after-tax money you contributed, which is returned to you tax-free.

Other boxes provide state-level information, such as Box 14 for state tax withheld and Box 15 for the payer’s state identification number for your state tax return. Box 7 contains a distribution code that provides information to the IRS about the nature of your withdrawal.

Decoding the Distribution Codes in Box 7

The code in Box 7 of Form 1099-R is a shorthand explanation for the IRS, clarifying the reason for the distribution and influencing its tax treatment. Understanding which code applies to your situation is necessary, as it can determine whether you owe additional taxes or penalties.

One of the most common codes is Code 7, which signifies a normal distribution. This is used for individuals who are over age 59½ and are taking standard retirement withdrawals. These are taxable as ordinary income but are not subject to any early withdrawal penalty. In contrast, Code 1 indicates an early distribution where there is no known exception to the 10% additional tax.

If you took an early distribution but qualify for an exception, such as for certain medical or educational expenses, you might see Code 2, “Early distribution, exception applies.” This tells the IRS that the payer is aware of a circumstance that allows you to avoid the 10% penalty. For beneficiaries, Code 4, “Death,” is used for distributions made from a deceased person’s account.

Rollovers have their own set of codes. Code G is used for a direct rollover of funds from a qualified plan to another eligible retirement plan, like an IRA or another 401(k). This transaction is not taxable but must be reported. Code H is used for the direct rollover of a designated Roth account distribution to another Roth account.

How to Report Form 1099-R on Your Tax Return

You must transfer the information from Form 1099-R to your annual tax return, Form 1040. For IRA distributions, the gross amount from Box 1 is entered on Line 4a of Form 1040, and the taxable portion from Box 2a is reported on Line 4b. For pensions and annuities, the gross distribution is entered on Line 5a, and the taxable amount is reported on Line 5b.

The federal income tax withheld, as reported in Box 4 of your 1099-R, is entered on Line 25d of Form 1040. This amount is added to your other tax payments for the year.

The code in Box 7 dictates further action. If you completed a rollover and your form has a Code G, you still report the gross amount on the appropriate line (4a or 5a), but you enter $0 on the taxable amount line (4b or 5b) and write “ROLLOVER” next to it. If your form shows Code 1 in Box 7, you will need to file Form 5329 to calculate and pay the 10% penalty on the early distribution. For distributions involving after-tax contributions to a traditional IRA, you may need to file Form 8606 to determine the taxable portion.