PURPOSE: The purpose of this announcement is to advise payers making distributions from IRAs of changes to the distribution codes entered in box 7 on the 2001 Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
CHANGES TO DISTRIBUTION CODES
- Notice 2000-30, 2000-25 I.R.B. 1266, specifies a new method for reporting recharacterizations and reconversions occurring after 2000.
RESULT. Because of Notice 2000-30, the following changes are being made to the distribution codes:
- CODE N is added for reporting a "Recharacterized IRA contribution made for 2001."
- CODE R is changed to report a "Recharacterized IRA contribution made for 2000."
- Only two distribution codes can be entered in box 7 on Form 1099-R. Therefore, payers were only able to report a distribution as the result of an excess contribution to a Roth IRA by using Code J with Code 8 or P. Payers could not use Code 1, 2, 3, or 4 if Codes J and 8 or P applied.
RESULT. To alleviate this reporting problem, the following changes are being made to the distribution codes:
- CODE J is changed to report an "Early distribution from a Roth IRA, no known exception."
- CODE T is added to report a "Roth IRA distribution, exception applies."
Therefore, payers can only use the following codes for a Roth IRA distribution:
- CODE J for an early distribution from a Roth IRA, no known exception. (Do not use Code 1 with Code J. However, you must use Code 5, 8, or P, if applicable.)
- CODE T for a distribution from a Roth IRA, exception applies. (Do not use Code 2, 3, 4, or 7 with Code T. However, you must use Code 5, 8, or P, if applicable.)
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