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If you took money out of an IRA, 401(k), pension, or other retirement account during the year, you'll receive Form 1099-R from the plan custodian. It reports how much you received and how much was withheld for taxes, and it includes a code that tells the IRS what type of distribution it was.
The Distribution Code in Box 7
Box 7 is one of the most important boxes on the 1099-R. The code tells the IRS — and your tax software — how to treat the distribution. Code 1 means an early distribution, subject to the 10% early withdrawal penalty unless an exception applies. Code 2 means early but exempt from the penalty (such as a SEPP distribution). Code 7 is a normal distribution from a retirement account after age 59½. Code G means a direct rollover, which generally has no tax consequence.
Taxable vs. Non-Taxable Amounts
Box 2a shows the taxable amount of your distribution. For traditional IRAs and pre-tax 401(k)s, the full distribution is usually taxable. For Roth accounts, qualified distributions are tax-free. If you made after-tax (non-deductible) contributions to a traditional IRA, part of each distribution is tax-free, which gets calculated on Form 8606.
Withholding
Box 4 shows federal income tax withheld. Retirement account custodians typically withhold 20% from 401(k) distributions and 10% from IRA distributions unless you opt out or request a different amount. That withholding counts as a payment toward your tax liability when you file.
Early Withdrawal Penalty
If you took money out before age 59½ and Box 7 shows Code 1, you'll owe a 10% penalty on top of income tax unless you qualify for an exception. Exceptions include total and permanent disability, substantially equal periodic payments, certain medical expenses, and a few others. If you took an early distribution, look into whether any exception applies before filing.
Required Minimum Distributions
Once you reach the required beginning date for RMDs, your distributions will be reported on a 1099-R like any other. The RMD amount itself isn't separately identified on the form, but failing to take your RMD results in a significant penalty — 25% of the amount you should have taken.