1099-R distribution codes are the numbers and letters in Box 7 that tell the IRS what kind of payment the form reports: an early distribution, a normal one, a death benefit, a rollover or a correction. A code can decide whether the 10% additional tax may apply and which form comes next. The payer chooses it, and sometimes chooses wrong.
The 1099-R distribution codes in Box 7, grouped
The 1099-R distribution codes fall into a few groups. Codes 1 and 2 mark early distributions, 7 a normal one, 4 a death benefit and 3 disability. G and H mark direct rollovers, and 8 and P mark corrective payouts of excess contributions or deferrals. The rest cover Roth accounts, loans, annuities and less common cases.
The Instructions for Forms 1099-R and 5498 (2026) define each code in Table 1, "Guide to Distribution Codes." They also tell payers to "read the codes carefully and enter them accurately because the IRS uses the codes to help determine whether the recipient has properly reported the distribution." On the 2026 form, the box has a new number: the instructions say "we renumbered box 7 and the 'IRA/SEP/SIMPLE' checkbox to boxes 7a and 7b." A 2025 form still shows both in Box 7.
The early, normal and death codes do most of the work on individual returns:
- Code 1, early distribution, no known exception. The instructions say to use it when the participant is under 59½ and the payer does not know of an exception. They add that the payer uses code 1 even for distributions made for medical expenses, higher education, a first home and several other purposes that may qualify for an exception.
- Code 2, early distribution, exception applies. The payer knows of an exception, such as a Roth IRA conversion, an IRS levy, separation from service in or after the year the participant turns 55, or a series of substantially equal periodic payments.
- Code 3, disability.
- Code 4, death. Used "regardless of the age of the participant" for payments to a beneficiary, estate or trust.
- Code 7, normal distribution. Age 59½ or older, and the default "if no other code applies," but never for a Roth IRA.
Every Box 7 code with the 10% question and the next form
This table covers all 30 codes in Table 1 of the 2026 instructions. The "Used with" column is the instructions' list of allowed second codes. The 10% column says only what the code itself signals; the facts decide. Form 1040 line references are from the 2025 Instructions for Form 1040.
| Code | Plain meaning | Used with | 10% additional tax? | Form a preparer reaches for next |
|---|---|---|---|---|
| 1 | Early distribution, no known exception | 8, B, D, K, L, M, P | May apply | Form 5329 if an exception applies |
| 2 | Early distribution, exception applies | 8, B, D, K, L, M, P | Code signals an exception | Form 1040 lines 4a/4b or 5a/5b |
| 3 | Disability | D | Code signals an exception | Form 1040 lines 5a/5b or 4a/4b |
| 4 | Death | 8, A, B, D, G, H, K, L, M, P, Y | Code signals an exception | Form 1040 lines 4a/4b or 5a/5b |
| 5 | Prohibited transaction; account no longer an IRA | None | Not signaled by the code | Payer's explanation |
| 6 | Section 1035 exchange | W | No, tax-free exchange | None indicated by the code |
| 7 | Normal distribution | A, B, D, K, L, M, Y | Code signals none | Form 1040 lines 4a/4b or 5a/5b |
| 8 | Excess contributions or deferrals taxable in 2026 | 1, 2, 4, B, J, K | Not for excess deferrals | Form 1040 line 1h for deferrals |
| 9 | Cost of current life insurance protection | None | Not applicable | Box 2a amount |
| A | May be eligible for 10-year tax option | 4, 7 | Code signals none | Form 4972 |
| B | Designated Roth account distribution | 1, 2, 4, 7, 8, G, L, M, P, U | Depends on the paired code | Form 1040 lines 5a/5b |
| C | Reportable death benefits under section 6050Y | D | Not applicable | Payer's explanation |
| D | Nonqualified annuity payments; may be subject to section 1411 | 1, 2, 3, 4, 7, C | Depends on the paired code | Form 8960 may apply |
| E | Distributions under EPCRS | None | Not signaled by the code | Payer's explanation |
| F | Charitable gift annuity | None | Not signaled by the code | Payer's explanation |
| G | Direct rollover and direct payment | 4, B, K | No for the rolled-over amount | Form 1040 line 4c or 5c rollover box |
| H | Direct rollover of a designated Roth account to a Roth IRA | 4 | No for the rolled-over amount | Form 1040 line 5c rollover box |
| J | Early distribution from a Roth IRA, no known exception | 8, P, S | May apply | Form 8606, then Form 5329 |
| K | Traditional IRA assets without a readily available FMV | 1, 2, 4, 7, 8, G, Y | Depends on the paired code | Form 1040 lines 4a/4b |
| L | Loan treated as a deemed distribution | 1, 2, 4, 7, B | Depends on the paired code | Form 1040 lines 5a/5b |
| M | Qualified plan loan offset | 1, 2, 4, 7, B | Depends on the paired code | Form 1040 lines 5a/5b |
| N | IRA contribution for 2026 recharacterized in 2026 | None | No | None indicated by the code |
| P | Excess contributions or deferrals taxable in 2025 or earlier | 1, 2, 4, B, J | Not for excess deferrals | Prior-year return |
| Q | Qualified distribution from a Roth IRA | None | No | Form 1040 lines 4a/4b |
| R | IRA contribution for 2025 or earlier recharacterized in 2026 | None | No | Prior-year return |
| S | Early SIMPLE IRA distribution in the first 2 years, no known exception | J | May apply | Form 5329 |
| T | Roth IRA distribution, exception applies | None | Code signals an exception | Form 8606 |
| U | ESOP dividends under section 404(k) | B | Not signaled by the code | Not an eligible rollover distribution |
| W | Charges for qualified long-term care insurance under combined arrangements | 6 | Not applicable | None indicated by the code |
| Y | Qualified charitable distribution | 4, 7, K | Code signals none | Form 1040 lines 4a/4b |
IRS Publication 525 (2025) says a corrective distribution of excess deferrals "isn't subject to the additional tax on early distributions," which is the source for the codes 8 and P rows. For code 1, the Instructions for Form 5329 (2025) say that if code 1 "is correctly shown" and the client owes the additional tax on the full amount, Form 5329 is not needed and the tax goes directly on Schedule 2.
How do two 1099-R distribution codes combine in Box 7?
Two 1099-R distribution codes combine when one number describes the timing and one letter describes the account or event. Common valid pairs are 1 and B, 7 and B, 4 and G, 7 and A, and 7 and D. Box 7 holds at most two codes, and only three number pairs are allowed: 8 with 1, 2 or 4.
The 2026 instructions say "enter a maximum of two alphanumeric codes" and "only three numeric combinations are permitted on one Form 1099-R: codes 8 and 1, 8 and 2, or 8 and 4." If two other numeric codes apply, the payer files more than one form. The instructions give the example of a distribution that is partly premature and partly not: one Form 1099-R for the code 1 part, another for the code 7 part.
A few pairs carry specific instructions:
- Codes 4 and G are used for a direct rollover for a surviving spouse or a nonspouse designated beneficiary, and 4 and H when the rollover comes from a designated Roth account to a Roth IRA.
- Codes 7 and A mark a normal distribution that may qualify for the 10-year tax option, which applies only to participants born before January 2, 1936, or their beneficiaries.
- Code P with code 1 is required for a traditional IRA corrective distribution when code 1 applies.
- Code Y marks a qualified charitable distribution, and the instructions say it must be used first with 4, 7 or K. They also say that for 2026, "using code Y is optional," so a QCD can arrive with no Y at all.
- Codes M and B or L and B cover a loan offset or deemed loan distribution from a designated Roth account. When a numeric code is needed to show whether the 10% tax applies, the instructions say to drop the M or L.
A code pair outside the "Used with" lists in the table above is a sign the form needs a second look. It does not prove the tax result is wrong, but it does mean the form does not follow the payer's instructions, which is worth raising with the payer before the return is filed.
A pension or annuity that pays monthly usually shows code 7 alone year after year. Retirees often bring one of these alongside an SSA-1099 for Social Security benefits, which the post on the SSA-1099 explained covers. The full list of retiree documents to request is in the post on tax document checklist additions for retirees.
1099-R distribution codes for rollovers and Roth conversions
1099-R distribution codes for rollovers depend on how the money moved. A direct rollover from a plan to an IRA or another plan carries code G, and a direct rollover from a designated Roth account to a Roth IRA carries code H. An indirect rollover, where the client took the money and redeposited it, shows code 1 or 7.
The 2026 instructions say to use code G "for a direct rollover from a qualified plan, a section 403(b) plan, or a governmental section 457(b) plan to an eligible retirement plan," and also for in-plan Roth rollovers that are direct rollovers. Code H is reserved for Roth-to-Roth direct rollovers. The 2025 Form 1040 instructions point a rollover, "including a direct rollover," to the rollover checkbox on line 5c.
An indirect rollover is harder to spot from the 1099-R alone. The form looks like a regular distribution because, from the payer's side, it was one. The receiving IRA custodian reports the redeposit in Box 2 of Form 5498, which the instructions describe as "rollover contributions (or contributions treated as rollovers) to any IRA," including "a 60-day rollover." Pairing the client's 1099-R with the 5498 is how a preparer sees both halves. A trustee-to-trustee transfer between IRAs usually produces no 1099-R at all; the instructions say "generally, do not report a transfer between trustees or issuers that involves no payment or distribution of funds to the participant."
Roth IRA conversions use the age codes. The instructions say "use code 2 in box 7a if the participant is under age 59½ or code 7 if the participant is at least age 59½," and "also check the IRA/SEP/SIMPLE checkbox in box 7b." A conversion cannot be undone; the instructions note there are "no recharacterizations of conversions made in 2018 or later."
Excess deferral refunds are not rollovers, though they can be mistaken for one: money leaves a plan because too much went in. Code 8 or P on these forms often traces back to a client who deferred at two jobs in one year, as the post on W-2 Box 12 codes explains.
An HSA funded from an IRA is a special case. The 1099-R instructions say "there is no special reporting for qualified health savings account (HSA) funding distributions," so the 1099-R looks like an ordinary IRA distribution. The HSA side appears on the custodian's forms, covered in the post on Form 1099-SA and Form 5498-SA.
What does the IRA/SEP/SIMPLE checkbox add to a 1099-R distribution code?
The IRA/SEP/SIMPLE checkbox tells you the distribution came from a traditional IRA or a Roth SIMPLE IRA rather than an employer plan. That changes how the same code reads. Code 1 with the box checked is an early IRA distribution, and code 1 without it is an early plan distribution, and the two have different exceptions to the 10% tax.
The 2026 instructions say to check the box, now Box 7b, "if the distribution is from a traditional IRA or Roth SIMPLE IRA." They say not to check it "for a distribution from a Trump account, from a Roth IRA that is not a Roth SIMPLE IRA, or for an IRA recharacterization." A distribution from a Roth IRA that is not a Roth SIMPLE IRA therefore shows code J, Q or T with the box empty.
The checkbox first decides the line on the return. The 2025 Form 1040 instructions put IRA distributions on lines 4a and 4b and pensions and annuities on lines 5a and 5b. A checked box points to lines 4a and 4b.
It also decides which exceptions to the 10% tax are even possible. The exception table in the Form 5329 instructions makes the split clear:
| Exception number | Exception | Applies to IRAs? |
|---|---|---|
| 01 | Separation from service in or after the year the participant turns 55 | No, plans only |
| 06 | Payments to an alternate payee under a QDRO | No, plans only |
| 07 | Health insurance premiums for certain unemployed individuals | IRAs only |
| 08 | Qualified higher education expenses | IRAs only |
| 09 | First home purchase, up to $10,000 | IRAs only |
A code 1 form with the box checked for a 56-year-old who left a job cannot use exception 01, because that exception "doesn't apply to IRAs." The same code without the box checked, from the employer's 401(k), may. Reading the code without the checkbox misses that difference.
When a 1099-R distribution code is wrong
A 1099-R distribution code is wrong when it does not match the facts, such as code 1 on a distribution that qualifies for an exception. The two routes are a corrected Form 1099-R from the payer, or the correct treatment reported on Form 5329. Which fits depends on whether the payer erred.
Code 1 is often not an error. The instructions tell payers to use code 1 when they "do not know if any of the exceptions" apply, and to use it even for some purposes that qualify, like medical expenses or a first home. In that case the payer did its job, and the exception is claimed on the return. The Form 5329 instructions say a client must file Form 5329 when they meet an exception "but box 7 of your Form 1099-R doesn't indicate an exception or the exception doesn't apply to the entire distribution."
Some codes are plain errors. The Form 5329 exception list includes number 12 for "distributions incorrectly indicated as early distributions by code 1, J, or S in box 7 of Form 1099-R," for amounts received at age 59½ or older. A wrong code on the form, a missing IRA checkbox, or a rollover coded as a distribution are payer errors, and the 1099-R instructions warn that "if the codes you enter are incorrect, the IRS may improperly propose changes to the recipient's taxes." A corrected form from the payer fixes the record the IRS matches against. How corrected 1099s are handled after a return is filed is covered in the post on a corrected 1099 after filing.
Which path to take, and what the client's distribution qualifies for, is the preparer's judgment. The code only tells you what the payer believed.
Catching a code problem starts with reading every 1099-R the client sends, including the second one for the same account. Recognizing the 1099-R among other 1099 variants is covered in the post on the 1099 variants 1099 OCR has to recognize. Schema CPA reads the 1099 series and flags a form that came in last year but not this year, which matters for a client whose pension produced a 1099-R every year. The workflow on the homepage shows that check, and you can get started with a few clients.