What is Box 7 on Form 1099-R?

Box 7 carries the distribution code (or two codes) that tells the IRS what kind of retirement distribution you received: normal, early, rollover, death benefit, loan default, returned contribution, and so on. The IRS matches the code against your return, so a wrong or misunderstood code is a common source of IRS letters. On forms for tax year 2026 and later the box is renumbered 7a.

Which 1099-R code means my rollover is not taxable?

Code G marks a direct rollover between plans or to an IRA, and code H a direct rollover of a designated Roth account to a Roth IRA; both are normally nontaxable but still reportable. One trap: code G with an amount in box 2a means pre-tax money went to a Roth destination, and that amount IS taxable. An indirect 60-day rollover is correctly coded 1 or 7, and you reconcile it on your return.

Do I owe the 10 percent penalty if my 1099-R shows code 1?

Not necessarily. Code 1 only means the payer is not certifying an exception. Many statutory exceptions (medical costs, higher education, first home, birth or adoption, disaster, and others) are claimed by you on Form 5329 even though the form says code 1. If no exception applies, the 10 percent goes on Schedule 2.

What do I do if the code on my 1099-R is wrong?

Contact the payer and request a corrected 1099-R; the IRS says to do this whenever information on the form is incorrect. If no corrected form arrives by the end of February, you can call the IRS for assistance, and as a last resort file Form 4852 as a substitute, amending later if a corrected form differs.

1099-R Box 7 Codes: Every Distribution Code, Decoded

The little code in Box 7 is the most consequential character on your 1099-R: it tells the IRS whether your retirement money was a normal withdrawal, an early one, a rollover, a death benefit, or a correction, and the IRS matches it against your return. Here is every code from the official IRS instructions, in plain English, with the taxed-or-not answer and the traps.

Which form year are you holding? Forms received in early 2026 for the prior tax year use the classic single Box 7. Starting with tax year 2026 forms (arriving in 2027), the IRS renumbers it to Box 7a, moves the IRA/SEP/SIMPLE checkbox to 7b, and adds a new code Y for charitable distributions. The codes below cover both.

The common ones

Code 1: Early Distribution, No Known Exception

You took money out before 59 and a half, and the payer is not vouching for any penalty exception. That does not mean you owe the penalty; it means that if an exception applies, you claim it yourself.

Full decode → 2

Code 2: Early Distribution, Exception Applies

You are under 59 and a half, but the payer is certifying that a recognized exception covers this money, so no 10 percent additional tax.

Full decode → 3

Code 3: Disability

The payer treated this as a disability distribution, which is exempt from the early distribution penalty at any age.

Full decode → 4

Code 4: Death

You received this money as a beneficiary after the account owner died.

Full decode → 7

Code 7: Normal Distribution

An ordinary withdrawal after 59 and a half. The most common code there is.

Full decode →

Rollovers

Code G: Direct Rollover

Your money moved trustee-to-trustee into another retirement account without touching your hands. Normally nothing is taxable.

Full decode → H

Code H: Direct Rollover of a Designated Roth Account to a Roth IRA

Your Roth workplace money moved straight into a Roth IRA. Not taxable.

Full decode →

Roth IRA codes

Code J: Early Distribution From a Roth IRA

Roth IRA money out early. It is not automatically taxable: your own contributions come out tax and penalty free; the ordering rules decide the rest.

Full decode → Q

Code Q: Qualified Distribution From a Roth IRA

The fully tax-free Roth IRA outcome: the account is old enough and you meet an age or condition test.

Full decode → T

Code T: Roth IRA Distribution, Exception Applies

You pass the age or condition test; the payer just cannot see when your first Roth IRA was funded. If you know you met 5 years, the distribution is tax free anyway.

Full decode →

Loans and corrections

Code 8: Excess Contributions Returned, Taxable This Year

You put in more than the limit allowed, and the plan or IRA returned the excess plus its earnings. The earnings are taxable on the return for the same year as the form.

Full decode → L

Code L: Loan Treated as a Deemed Distribution

Your 401(k) loan defaulted, so the unpaid balance counts as a taxable distribution even though no new money reached you.

Full decode → M

Code M: Qualified Plan Loan Offset

You left the job (or the plan ended) with a loan outstanding, and the balance was subtracted from your account.

Full decode →

Code N: Recharacterized Contribution (Same Year)

You changed this year's contribution from Roth to traditional (or the reverse) in the same year.

Code P: Excess Contributions Returned, Taxable in the Prior Year

An over-contribution came back to you, and its earnings belong on last year's return, not this year's.

Full decode →

Code R: Recharacterized Contribution (Prior Year)

You switched last year's contribution to the other IRA type this year; may affect last year's return.

Special situations

Code 5: Prohibited Transaction

Self-dealing or another forbidden arrangement disqualified the whole account, which is treated as fully distributed.

Code 6: Section 1035 Exchange

You swapped one insurance or annuity contract for another tax free; usually nothing is taxable.

Code 9: Cost of Current Life Insurance Protection

The taxable value of insurance coverage bought inside your plan, not cash you received.

Code A: Eligible for 10-Year Tax Option

A special old-law tax computation might apply to this lump sum.

Code B: Designated Roth Account Distribution

Money out of a workplace Roth account rather than a Roth IRA; pairs with a number showing your status.

Code C: Reportable Death Benefits

A death benefit from a policy that had been sold or transferred; special reporting applies.

Code D: Nonqualified Annuity Payments

Payments from an ordinary commercial annuity, not a retirement account; pairs with a number showing your status.

Code E: Employee Plans Compliance Resolution System

Your employer's plan broke a rule and is returning money as part of an approved fix.

Code F: Charitable Gift Annuity

Annuity payments you receive from a charity in exchange for a donated gift.

Code K: Assets Without a Readily Available Value

Your IRA distributed a hard-to-value asset instead of cash; pairs with a number showing your status.

Code S: Early SIMPLE IRA Distribution, First 2 Years

An early SIMPLE IRA withdrawal in your first two years, where the additional tax rises from 10 to 25 percent.

Code U: ESOP Dividends

Employer-stock dividends paid out of your ESOP: taxable, not rollable, but no early distribution penalty.

Code W: Long-Term Care Rider Charges

Your policy's cash value paid for its long-term care rider; reported but generally not taxable.

Code Y: Qualified Charitable Distribution (New for 2026 Forms)

IRA money sent straight to charity. If your form is for 2025 or earlier, you will not see this code.

If the code looks wrong

The IRS uses these codes to check your return, so a wrong code invites a mismatch letter. The fix order: ask the payer for a corrected 1099-R (the IRS's standing instruction for incorrect forms); if nothing arrives by the end of February, the IRS can contact the payer for you; and as a last resort, Form 4852 substitutes for the form, with an amended return later if the correction differs. One frequent non-error: an indirect 60-day rollover correctly shows code 1 or 7, because the payer cannot know you redeposited the money; you reconcile it on your return. The mechanics of getting rollovers coded cleanly in the first place are in our rollover guide.

Sources: IRS Instructions for Forms 1099-R and 5498 (Guide to Distribution Codes); IRS Tax Topics 413, 558, and 154. Verified July 2026.

This decoder is general educational information, not tax advice. Distribution taxation depends on your facts; consult a qualified tax professional. ClearChoiceRadar is not affiliated with the IRS or any government agency.