1099-R box 7 distribution code

Forum|Forum|2 years ago
February 20, 2024
1 reply
3 views

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

Level 15

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.

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ragsplaceAuthor

Level 2

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?

dmertz

Level 15

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

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.