topic Re: Incorrect distribution code on 1099-R? in Retirement tax questions

Incorrect distribution code on 1099-R?

aidenjk — Mon, 23 Feb 2026 10:43:16 GMT

Hello, so I inherited a 401k from my grandpa 2 years ago. I started college this year, so I took money out to help pay for college. I received my 1099-R from Fidelity, which has my distribution code as 1. This is incorrect, yes? Since I am a non-spousal inheritor, I have 10 years to get the money out of the account, and I do not have to pay the 10% early withdrawal fee, right? I do not know if I would have to enter the money taken out under "Death" in TurboTax? Do I need to contact Fidelity on this? Any help is appreciated.

Re: Incorrect distribution code on 1099-R?

fanfare — Thu, 19 Jan 2023 05:41:50 GMT

First look at your yearly statements and confirm that the account names you as beneficiary, not owner.

Then call Fidelity to get a corrected 1099-R with Code 4.

@aidenjk

Re: Incorrect distribution code on 1099-R?

dmertz — Thu, 19 Jan 2023 16:14:03 GMT

This is a real problem that only Fidelity can correct, if it's even possible to correct. The code-1 Form 1099-R implies that the funds were moved from your grandfather's IRA to an IRA owned by you instead of to an inherited IRA maintained for your benefit. It also implies that the original movement of funds was a taxable distribution paid to you to you from your grandfather's IRA and a regular, possibly excess, traditional IRA contribution made by you.

Did Fidelity hold this your grandfather's IRA? If so, it's almost unimaginable that Fidelity's estate processing division would have made such an error. I assume that you received no (2020? 2021?) Form 1099-R with regard to the movement of your grandfather's IRA to the account maintained for your benefit, otherwise the Form 1099-R substantiates that you received a taxable distribution that was not eligible to be rolled over to an inherited IRA. A non-spouse beneficiary is only permitted to move an inherited IRA by nonreportable trustee-to-trustee transfer, not by distribution and rollover.