The instructions for code 7 in box 7 say:
"Use Code 7: (a) for a normal distribution from a plan, including a traditional IRA,
section 401(k), or section 403(b) plan, if the employee/taxpayer is at least age
591/2; (b) for a Roth IRA conversion if the participant is at least age 591/2; and (c)
to report a distribution from a life insurance, annuity, or endowment contract and for reporting income from a failed life insurance contract under section 7702(g) and (h). Generally, use Code 7 if no other code applies. Do not use Code 7 for a Roth IRA."
The lack of a second code in box 7 implies this is a qualified retirement plan, which is why it is limiting the credit from Form 8880.
If you don't agree you can contact the state comptroller's office and ask for a correction of the 1099-R form. Click here for contact information.
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