That Form 1099-R doesn't make sense.
Code 1 indicates a distribution from the traditional 401(k) account, not a distribution from a Roth 401(k) account. A distribution from a Roth 401(k) should have both code 1 and code B. However, the fact that they show some amount as nontaxable seems to suggest that they knew that they were making a distribution from a Roth 401(k). (I assume that there is no after-tax basis in the traditional 401(k) account).
I assume that the distribution was requested to be made from the old employer's Roth 401(k) because such a distribution is not permitted to be made before age 59½ or separation from service.
It's hard to know how they did their calculation of the taxable amount. If they did make the distribution from the Roth 401(k) and simply omitted the code B from box 7, it seems that they might have simply been reporting it as an ordinary Roth 401(k) distribution where the account consisted of 93.333% contributions and 6.667% gains. However, the first $1,500 and it's attributable gains distributed from the account are required to be taxed upon distribution. If the account saw gains between the time of the contribution and the time of the distribution, the entire amount should have been shown as taxable and some amount of taxable attributable gain remains in the account.
After confirming that the distribution was actually made form the Roth 401(k), you could probably submit a substitute Form 1099-R (Form 4852) showing codes 1 and B in box 7 and showing the entire amount as taxable treating it as if there had been no attributable gains. If the plan actually processed it as an ordinary distribution, that also means that they have reduced contribution basis in the plan by only $1,400, not $1,500, so they will also be reporting any future nonqualified distributions as slightly less taxable than they actually are. At that time would be extremely difficult to figure out what amount of such future distributions should actually be taxed, so it probably would not be worth even trying.
