What is distribution code "G" in box 7 on 1099-R?

[Critter-3]

 No ... code G by itself would not be correct for a taxable event ... in fact the code G should not be on the form at all so you can ignore it. 

[dmertz]

Code G is the only correct coding for an IRR.

[Critter-3, code G is used for both taxable and nontaxable direct rollovers other than direct rollovers from a designated Roth account to a Roth IRA which are reportable with code H.]

Code BG would be for a rollover of a designated Roth account in a plan like a 401(k) to another designated Roth account at a different employer.  Such a rollover is never taxable, so a Form 1099-R with codes B and G in box 7 and a nonzero amount in box 2a would be bogus.  (However, TurboTax will not flag this error and will effectively ignore the code B by treating the transaction as taxable when box 2a is nonzero.)

As you indicated, code 7 is not permitted to be combined with code G and the payer probably should have just used code G.

[taxaction-3]

@dmertz, I thank you for your reply and sharing.  Your assessment matches mine that all three 1099-Rs should have been G and only G in the box which means the new record keeper is correct.  

In the first case (7G) they left box 2 at zero which is clearly incorrect and I reported it as taxable and paid the taxes on it.  The IRS questioned this after I filed, agreed with me that the box 2 amount should have been = 1 box 1 and later I got the first corrected 1099R.  This one contained other discrepancies which resulted in a second corrected 1099R.   

In the second case, I hope the IRS did the same with the B and kept the G.  In any event, the correct tax was paid.

[Critter-3]

Ignore the G if it is the second code listed ... only the first code carries weight.   No corrected form is needed ... you just have to be wiser than the issuer. 

[dmertz]

Critter-3 is incorrect about ignoring any codes.  There is no weighting between codes, the payer is permitted to list the appropriate codes in any order.  In the cases of the IRRs that you described, the code G is the correct code.

Each code has a specific meaning, but some combinations are not permitted because they have incompatible meanings.  For example, code 7 implies a distribution paid to you while code G implies a rollover paid directly from a qualified retirement plan to another retirement account, not a distribution paid to you.  The IRS has no way of knowing which of these codes describes the transaction when they are incompatible with each other, and there could be a taxable difference depending on which code actually applied.

In most cases, if an incorrect Form 1099-R has been prepared by the payer, the payer must make the correction.  If the payer refuses to make a needed correction, there is the option to file a substitute Form 1099-R (Form 4852) with the correct information, but doing so would preclude e-filing.

[taxaction-3]

@dmertz Thank you.  I have long ago learned that one mustn't ignore codes until there is a clear understanding of the codes and the reasoning for them.   I have reviewed the timing of the earlier 1099-Rs with the differing codes for the same transaction.   The oldest problematic 1099R is now 7 years past and there is correspondence with Kansas City on this which points to a taxable event with a G code despite the record keeper/custodian marking it 7G.  The other one is 6 years past (BG).  All the modern ones with the new record keeper at least 3 years back are correct based on this discussion.    I also do not file electrically.  There are other reasons why I cannot, as well as these.  Other than the deforestation and postage weight, makes no difference to me how I file as long as I do it right.cheers and thanks for the very helpful input.

[eleven13]

Hi, I have a similar situation. I got a 401K account with my previous company and I changed my job by the end of 2021, and I transferred all money from that 401K to a Roth IRA by beginning of 2022. My 1099R shows box 1 and 2a the same amount (my transferred amount) and 2b says total distribution. And by box7, it says G only. No other code. So My question is, I will need to pay for tax for the total amount of what's shown in 2a, cos its from 401k to Roth IRA? By paying tax for this part, it's simply just add the total amount from 1099R 2a to my total income, then calculate how much tax I need to pay? 

[eleven13]

Hi, I have a similar situation. I got a 401K account with my previous company and I changed my job by the end of 2021, and I transferred all money from that 401K to a Roth IRA by beginning of 2022. My 1099R shows box 1 and 2a the same amount (my transferred amount) and 2b says total distribution. And by box7, it says G only. No other code. So My question is, I will need to pay for tax for the total amount of what's shown in 2a, cos its from 401k to Roth IRA? By paying tax for this part, it's simply just add the total amount from 1099R 2a to my total income, then calculate how much tax I need to pay?

[dmertz]

@eleven13 , yes, the entire amount of this direct rollover from the traditional 401(k) account to the Roth IRA is taxable.  TurboTax will include the amount from box 2a on line 5b of Form 1040, adding it to your taxable income from which your tax liability is calculated.

[Critter-3]

What your situation is the 401K plan administrator probably thought you were rolling the funds from the 401K to a traditional IRA hense the code G.   If you made the rollover to a traditional IRA in one tax year and then converted it in another tax year then you will report the conversion in the year of the conversion ... another 1099-R will be issued for that conversion.  

However if you skipped the traditional IRA rollover   and converted it to the ROTH  directly then you will need to use a code 7 in the box 7 of the 1099-R and NOT the code G. 

[dmertz]

"What your situation is the 401K plan administrator probably thought you were rolling the funds from the 401K to a traditional IRA hense the code G."

No, the 401(k) plan administrator understood that this was a direct rollover to a Roth IRA, hence the correct taxable amount in box 2a.  Code G is used for all direct rollovers from a traditional 401(k) account, including those to the designated Roth account in the same plan or to a Roth IRA.