1099-R box 7 distribution code

[ragsplace]

I retired at 57 and have a pension. Box 7 on my 1099-R has a 2 in it for the distribution code. I understand this would be correct for when I retired but now at the age of 64 shouldn't the distribution code be 7? I would've thought this should have changed the year I turned 59 1/2? Thank you.

[JohnB5677]

Yes, you can contact your plan administrator and request a change.  However I don't expect it will change your tax return.

Code 2 in box 7 subjects you to the early withdrawal penalty for people under age 59 1/2.

I don't expect that you paid, nor will pay this penalty.

There are (2) reasons for this.

• I expect that the IRA/SEP/SIMPLE Box is not checked.
  • This is the first indication that it is a retirement plan.
• In the interview, you should have indicated that you receive regular payments.
  • The regular payment feature will also negate the penalty

Please contact us again with any questions, and provide some additional details.

[ragsplace]

Hi John ,

I'm not concerned about my tax return for this year. Starting next year for me in Michigan on my state tax return I will get a tax break on my Michigan taxes for pension...my concern is how they will look at the code for me Michigan return and being eligible for the tax break?

[ThomasM125]

The Michigan Retirement Pension Subtraction uses your age and the amount of your pension to determine your allowed subtraction. The code in box 7 should not affect this, but it would be best to contact your employer and request it be change to the correct code of "7" for normal distribution if that applies to you.

[ragsplace]

Thanks Thomas,

The pension administrator says the code is correct but other retiree's that left before the age of 59 including my brother all have the code as 7... Michigan this years started reducing tax liability of pensions by 25 percent and increasing 25 percent over the next 3 years until 2026 up to $120,000 plus for married filing jointly

[dmertz]

As the other have said, code 2 is not to be used for distributions made after you have reached age 59½, so the plan is using the incorrect code.  However, code 2 and code 7 are treated the same by TurboTax (no early-distribution penalty), so the plan's misuse of the code 2 does not affect your tax return.  Still, they should get their act together and use the correct code.

[ragsplace]

Thank you so much... I'll hit them up again but in my opinion they won't change it .. should I contact the IRS about it?

[dmertz]

I suspect that the IRS has bigger problems to pursue since this issue does not affect one's tax return.