By being deposited into a nonqualified account, the distribution defaulted to being a normal distribution despite the code G in box 7 of the Form 1099-R. If you corrected the error by completing an indirect rollover of those funds within 60 days, there is no need to correct the Form 1099-R. Otherwise, as ThomasM125 said, the proper thing to do would be to enter a substitute Form 1099-R showing code 7 in box 7 and the appropriate taxable amount in box 2a (the same as the amount in box 1 unless the distribution included basis in after-tax contributions, which is probably not the case). Your explanation statement would indicate that this failed to be a direct rollover because the receiving account was not eligible to receive a rollover and therefore became a taxable distribution.
