How the distribution will be identified is based on the code that the payer entered in Box 7 of your Form 1099-R.
According to the Specific Instructions for Form 1099-R in the 2022 Instructions for Forms 1099-R and 5498, a payer is supposed to:
Use Code 7 in box 7 for reporting military pensions or survivor benefit annuities. Use Code 4 for reporting death benefits paid to a survivor beneficiary on a separate Form 1099-R.
The specific instruction for Code 4 is to “Use Code 4 regardless of the age of the participant to indicate payment to a decedent's beneficiary, including an estate or trust.”
Now, if you’ll see the Instructions for Recipient on the back of Form 1099-R, Code 4 of line 7 represents a death benefit, while Code 7 reflects a normal distribution. This is a source of confusion.
What Code(s) are you seeing on the relevant Form 1099-R?
