1099-R Code E: Employee Plans Compliance Resolution System

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

What the IRS instructions say

Official meaning, from the Instructions for Forms 1099-R and 5498 Distributions made under the IRS's plan-error correction program (EPCRS).

Is it taxable, and does the 10 percent penalty apply?

Generally taxable as ordinary income in the year you receive it, but with two breaks: the 10 percent early distribution additional tax generally does not apply to an EPCRS corrective distribution, and the money is not eligible to be rolled over. It is subject to income tax withholding. The exact taxable amount depends on the failure being corrected, so the payer sets Box 2a accordingly.

Worth knowing: Code E means the plan, not you, tripped a rule, often a contribution or nondiscrimination-testing limit, and the fix is to pay some money back out. You did nothing wrong; you just report the distribution.

If this code looks wrong

The IRS matches Box 7 against your return, so start with the payer: request a corrected 1099-R, which is the IRS's standing instruction for incorrect forms. No corrected copy by the end of February? The IRS can contact the payer for you, and Form 4852 substitutes as a last resort. Remember that an indirect 60-day rollover is correctly coded 1 or 7, because the payer cannot see the redeposit; direct rollovers should show G or H, as our rollover guide explains before the paperwork ever gets cut.

← All 1099-R Box 7 codes

Sources: IRS Instructions for Forms 1099-R and 5498; IRS Tax Topics 558 (early distributions), 413 (rollovers), and 154 (incorrect forms). Verified July 2026.

General educational information, not tax advice. Your distribution's taxation depends on your facts; consult a qualified tax professional. ClearChoiceRadar is not affiliated with the IRS or any government agency.