IRS Announces New Roth IRA Distribution Codes for Form 1099-R

The IRS has announced new and changed distribution codes for use in box 7 of Form 1099-R for 2001. Announcement 2000-86, 2000-44 IRB 456.

Background
The new changes in the Form 1099-R distribution codes were caused by Notice 2000-30, 2000-25 IRB 1266, which specified a new method for reporting recharacterizations and reconversions.

New and Changed Codes

  • Code N: A new code to be used for reporting a recharacterized IRA contribution for 2001.
  • Code R: Changed — to be used for reporting a recharacterized contribution for 2000.
  • Code J: Changed — to be used for reporting "Early distribution from A Roth IRA no known exception."
  • Code T : A new code to be used to report "Roth IRA distribution exception applies."
The announcement states that taxpayers can use only the following codes for Roth IRA distributions.

Code J cannot be used with Code 1 (early distribution no known exception). With Code J, a taxpayer must use Code-5-Prohibited Transaction; Code-8-Excess Contributions plus earnings taxable in 2000; or Code-P-Excess Contributions plus earnings taxable in 1999.

Code T can only be used with Code 5, 8, or P. Code T cannot be used with Code-2 Early Distribution with exception; Code-3 Disability; Code-4 Death; or Code-7 Normal Distribution.

Effect on Companies
Financial services institutions must use these new codes when completing Form 1099-Rs for distributions relating to Roth recharacterizations and reconversions.