What code do you see in box 7 of your 1099-R? If you see code u in box 7 then you have a dividend distribution from ESOP under sec 404(k). According to the Pennsylvania Department of Revenue, if the stock in the ESOP has been allocated to the plan participants, the income is dividend income to the recipient of the 1099-R and should be reported on PA Schedule B. If the stock in the ESOP has not yet been allocated to the plan participants, the income is compensation to the recipient. Therefore, you will need to contact the financial institution that issued your 1099-R to find out which it is.
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