What Is Form 1099-R and How Does It Affect Your Taxes?

Form 1099-R is the tax form that reports distributions of $10 or more from retirement accounts, pensions, annuities, and similar plans, and you use the dollar amounts and codes printed on it to fill out your federal return.¹ Your plan administrator or financial institution sends one copy to you and another to the IRS, so anything you report that doesn’t match the form will get flagged. The numbered boxes tell you how much came out and how much of it is taxable; the code in Box 7 tells you what kind of distribution it was and whether a penalty is in play.

When Your 1099-R Should Arrive

Payers must furnish the form by early February of the year after the distribution. For 2025 distributions, the deadline is February 2, 2026.² If you took money out and haven’t received the form by mid-February, contact the plan administrator first. If nothing arrives by the end of February, call the IRS at 800-829-1040 and they will contact the payer for you.³

Reading the Dollar Boxes

The numbered boxes define what you received, how much is taxable, what was already withheld, and whether any portion is money you already paid tax on. These figures matter more than the code in most cases, because they flow directly onto your return.

Boxes 1, 2a, and 2b: What You Got and How Much Is Taxable

Box 1 shows the gross distribution before any withholding. It includes both taxable and non-taxable portions. For a fully tax-deferred account like a traditional 401(k) where you never made after-tax contributions, Box 1 and Box 2a will usually match.

Box 2a is the portion subject to ordinary income tax. When the payer can determine your basis, they calculate it for you. If you made after-tax contributions or rolled after-tax money into the account, Box 2a should be lower than Box 1.

Box 2b has two checkboxes. If “Taxable amount not determined” is checked, the payer couldn’t calculate your basis and either left Box 2a blank or entered the full amount as a placeholder. You have to figure the taxable portion yourself using Form 8606 (for IRAs with nondeductible contributions) or the Simplified Method worksheet in IRS Publication 575 (for pensions and annuities).⁴ The “Total distribution” checkbox just means the payout was the entire account balance.

Boxes 4, 5, and 6: Withholding, Basis, and Employer Stock

Box 4 shows federal income tax already withheld. It’s a credit against your total tax bill, like withholding from a paycheck. IRA distributions default to 10% withholding, which you can decline. Employer-plan distributions that are eligible for rollover but paid to you directly trigger a mandatory 20% withholding you can’t waive.⁵

Box 5 shows the portion of the distribution representing money you already paid tax on: after-tax contributions to a traditional pension, or your original Roth contributions. This amount generally isn’t taxed again.

Box 6 applies only when employer stock is distributed from a qualified plan as part of a lump-sum distribution. It represents net unrealized appreciation, the growth in the stock’s value while it sat inside the plan. You don’t owe tax on the NUA when you receive the shares. You pay long-term capital gains rates on it when you eventually sell, regardless of how long you held after distribution. The stock’s original cost basis is taxed as ordinary income in the year of distribution.

What the Code in Box 7 Means

Box 7 contains a one- or two-character code that tells you and the IRS what kind of distribution this was. The code determines tax treatment and whether a penalty applies. Payers sometimes get it wrong, so it helps to know what each common code says.

Normal, Death, and Disability

Code 7 is the most common code for retirees and means you were at least 59½ at the time of the distribution. The taxable amount is subject to ordinary income tax, but no early withdrawal penalty applies. Code 7 is also used for Roth IRA conversions when the account holder is 59½ or older.⁶

Code 3 applies to distributions taken because you are totally and permanently disabled. Code 4 appears on distributions paid to a beneficiary after the account holder’s death. Neither is subject to the 10% early withdrawal penalty regardless of age.

Early Distributions

Code 1 means you were under 59½ and the payer doesn’t know whether a penalty exception applies. It’s the default when the payer can’t confirm one. The distribution is taxable as ordinary income and presumed subject to the 10% additional tax. If you actually qualify for an exception, you claim it on Form 5329 with your return.⁷ Code 1 doesn’t mean you owe the penalty; it means the payer isn’t taking a position.

Code 2 means the payer knows an exception to the 10% penalty applies. The IRS instructions list more than a dozen situations that qualify, including separation from service after age 55, substantially equal periodic payments, distributions under a qualified domestic relations order, and Roth conversions by someone under 59½.⁶ Regular income tax still applies; only the penalty is waived.

Code J indicates a distribution from a Roth IRA when you’re under 59½ and no penalty exception is known to the payer. Code J does not indicate a Roth conversion; a conversion for someone under 59½ carries Code 2 instead.⁶

Rollovers

Code G means funds moved directly from one qualified plan or IRA to another eligible retirement plan. The money never passed through your hands, so it’s non-taxable and no penalty applies. Box 2a will typically be zero. Code H covers the same kind of direct rollover but specifically from a designated Roth account (like a Roth 401(k)) into a Roth IRA.

Rollovers: Direct vs. Indirect

How the funds moved determines what shows up on the form and whether you owe tax. A direct rollover (trustee-to-trustee transfer) is clean. The money goes straight from one institution to another, the 1099-R shows Code G or H with a zero taxable amount, and you have nothing else to report.⁸

An indirect rollover is messier. The plan pays you directly, and you have 60 calendar days to deposit the funds into another eligible retirement account. Miss that window and the entire amount becomes taxable as ordinary income, plus the 10% early withdrawal penalty if you’re under 59½.⁹

An indirect rollover from an employer plan has a practical trap. The plan must withhold 20% for federal taxes before cutting you a check.⁵ To roll over the full distribution, you have to come up with that 20% from other funds and deposit it within 60 days. You get the withheld amount back as a refund when you file, but you need the cash up front. This is where many rollovers go wrong.

IRA-to-IRA indirect rollovers are also limited to one per 12-month period across all your IRAs. Direct trustee-to-trustee transfers don’t count toward that limit.

Roth Distributions and Conversions

Roth IRA distributions follow different rules. A qualified distribution is entirely tax-free and penalty-free. Two conditions have to be met: at least five tax years since you first funded any Roth IRA, and you must have reached 59½, become disabled, or be using up to $10,000 for a first-time home purchase.¹⁰ If both are met, the whole distribution (contributions and earnings) comes out tax-free.

Non-qualified Roth distributions follow an ordering rule. Your original contributions come out first, always tax-free and penalty-free. Then converted amounts. Then earnings. Only the earnings portion is taxable and potentially subject to the 10% penalty.

When you convert a traditional IRA to a Roth IRA, the institution issues a 1099-R with Code 2 (if you’re under 59½) or Code 7 (if 59½ or older).⁶ The converted amount appears in Box 2a as taxable income. You owe ordinary income tax on the taxable portion, but no 10% penalty regardless of your age. If you have basis in the traditional IRA from nondeductible contributions, Form 8606 determines what portion is actually taxable.⁴

The Early Withdrawal Penalty and How to Claim an Exception

Distributions taken before 59½ are generally subject to a 10% additional tax on top of regular income tax.¹¹ The penalty applies to the taxable portion (Box 2a, not Box 1). You report and calculate it on Form 5329.

The IRS lists a long set of exceptions. Some apply to both employer plans and IRAs; some apply only to one or the other. That distinction is where people go wrong.

Exceptions that apply to both employer plans and IRAs include:

Total and permanent disability certified by a physician.
Distributions to a beneficiary after the account holder’s death.
Substantially equal periodic payments (SEPP) calculated under one of three IRS-approved methods and continued for the longer of five years or until you reach 59½. Modify or stop the payments early and you owe retroactive penalties on every distribution, plus interest.¹²
Unreimbursed medical expenses above 7.5% of your adjusted gross income.
Distributions taken because the IRS levied the account.
Distributions to military reservists called to active duty for at least 180 days.

Employer-plan-only exceptions include separation from service in or after the year you turn 55 (age 50 or 25 years of service for public safety employees and certain firefighters), and distributions to an alternate payee under a qualified domestic relations order. The age-55 rule does not apply to IRAs, which is critical if you’re thinking about rolling an old 401(k) into an IRA before 59½.¹¹

IRA-only exceptions include up to $10,000 for a first-time home purchase (you haven’t owned a home in the prior two years), qualified higher education expenses for you, your spouse, your children, or your grandchildren, and health insurance premiums paid while receiving unemployment compensation for at least 12 consecutive weeks.¹⁰

Starting in 2024, SECURE 2.0 added several more exceptions available for both employer plans and IRAs: terminal illness distributions certified by a physician (condition expected to result in death within 84 months, repayable within three years); one emergency personal expense distribution per calendar year of up to $1,000; distributions of up to the lesser of $10,000 (indexed) or 50% of the vested balance for domestic abuse victims within one year of the abuse; and qualified birth or adoption distributions of up to $5,000 per parent within one year of the event.¹¹

To actually claim an exception when Box 7 shows Code 1 or Code J, you file Form 5329 with your return. On Line 2 you enter the amount and the corresponding exception number (01 for separation from service after 55, 02 for SEPP, 09 for a first-time home purchase from an IRA, and so on).⁷ Skip Form 5329 and the IRS will assume the full 10% penalty based on the code the payer reported.

Where the Numbers Go on Form 1040

For the 2025 tax year, IRA distributions go on Lines 4a and 4b of Form 1040. Line 4a gets the gross distribution from Box 1; Line 4b gets the taxable amount from Box 2a. If the entire distribution is taxable, you only fill in Line 4b. Pension and annuity distributions use Lines 5a and 5b the same way.¹³

If Box 2b is checked and you have a traditional IRA with basis from nondeductible contributions, you can’t just copy Box 1 to Line 4b. You complete Form 8606, which uses a ratio: your total basis divided by the combined value of all your traditional IRAs sets the tax-free percentage. The IRS aggregates every traditional IRA you own for this calculation, so you can’t isolate the one with nondeductible contributions to claim a bigger tax-free share.⁴

Federal income tax withheld from Box 4 goes on Line 25b, offsetting your total tax liability like any other withholding.

If you owe the 10% penalty or are claiming an exception, Form 5329 flows to Schedule 2 (Additional Taxes), which feeds Form 1040.

If you received an indirect rollover distribution and redeposited it within 60 days, report the full gross on Line 4a (or 5a) and the taxable amount (often zero) on Line 4b (or 5b). Write “Rollover” next to the line so the IRS can see why the numbers don’t match.

Net unrealized appreciation from Box 6 isn’t reported as income until you sell the stock. When you do, report the NUA portion as a long-term capital gain on Schedule D, regardless of holding period after distribution. The cost basis that was taxed as ordinary income in the distribution year becomes your starting basis for any additional gain or loss.

One boundary worth flagging: required minimum distributions from traditional IRAs and most employer plans starting at age 73 show up on a 1099-R just like any other distribution, typically with Code 7.¹⁴ Roth IRAs are exempt during the owner’s lifetime. The form itself won’t tell you whether you took your full RMD; that’s on you to track separately.

If Your 1099-R Is Wrong

Contact the payer first. Common errors include a wrong distribution code, an incorrect taxable amount, or withholding that doesn’t match your records. Ask the plan administrator to issue a corrected 1099-R marked “CORRECTED” in the header. If they refuse or don’t respond by the end of February, call the IRS at 800-829-1040 with your information and the payer’s. The IRS will contact the payer and send you Form 4852, which acts as a substitute for a missing or incorrect 1099-R.³

If you need to file before the corrected form arrives, use Form 4852 and estimate the correct amounts from your own records.¹⁵ If the corrected 1099-R later shows different numbers, amend your return with Form 1040-X.

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. General Instructions for Certain Information Returns (2025)
3
Internal Revenue Service. Topic No. 154, Form W-2 and Form 1099-R (What to Do if Incorrect or Not Received)
4
Internal Revenue Service. Instructions for Form 8606 (2025)
5
eCFR. 26 CFR 31.3405(c)-1 – Withholding on Eligible Rollover Distributions
6
Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
7
Internal Revenue Service. Instructions for Form 5329 (2025)
8
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
9
Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans
10
Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
11
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
12
Internal Revenue Service. Substantially Equal Periodic Payments
13
Internal Revenue Service. 2025 Instructions for Form 1040
14
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
15
Internal Revenue Service. About Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R