I received two 1099-R forms from same employer

[elro61]

I have been receiving a monthly pension payment from a prior employer for about  five years. In prior years, Box 11/Distribution Code was always a "2", which I think is "early distribution".

This year I received TWO 1099-R forms from that prior employer. One of the forms, for one month of pension, had a "2" in Box 11/ Distribution Code., just like prior years. But the second form, for 11 months of pension, had a "7" in Box 11/ Distribution Code. I think that's for "Normal Distribution" according to Turbo Tax. The total amount of the two forms is the same amount as prior years.

I'm wondering why I received two separate 1099-R forms and why one of them has a "7".  I think the amount on the form with the "7" is being taxed. I turned 60 in early 2021. Does that have something to do with it? Will all my future pension payments be taxed? I am not retired yet.

Thanks!

[FangxiaL · Accepted solution]

Yes, one 1099-R is for the distributions before you turned 59 1/2 (the one with code 2), and the other is for distributions after you turned 59 1/2 (distribution code 7). 

Code 2 is early distribution, exception applies. In your case, I assume that you turned age 55 when you left your prior employer, so the 10% addition to tax does not apply to you (code 2).

[VolvoGirl]

And the distribution code should be in box 7 not 11, right?  Code 7 is a normal distribution.  Yes they should be taxed.  Haven't they been taxed before?   

[elro61]

Hi Fangxail,

Thanks so much for your speedy answer. I turned 59 1/2 in 2020 (not 2021), so I'm not clear about the former employer's timing. Do you suggest I check with them?

So from now on, since it's "Normal Distribution", will I be taxed on the pension I receive? If so, what is the tax rate? Does that depend on my other income?

Thanks!

[elro61]

No, I don't think it was taxed when it was code 2, but I may be wrong

[dmertz]

Code 2 and code 7 are treated the same, so it may not be worth worrying about.

[DanP0428]

Code 2 is for early distribution.  You pay tax and a penalty on early distribution.  Once you reach 59-1/2 there is no early withdrawal penalty, so it become Code 7 for normal distribution.  It is taxed as income, but no penalty is paid on the withdrawal.  I do not know if you actually paid penalties, but you could have been subject to them before you turned 59-1/2.

[dmertz]

Code 2 is for an early distribution with no penalty.  Code 7 is for a normal distribution.  Both are taxed the same.