Miscoding on IRS Form 1099-R

[J. Bringhurst]

Client has been miscoding Box 7 of IRS Form 1099-R for certain annuity distributions from their DB plan for a seemingly random group of participants. Apparently, Code 4 (distribution on account of death) has been erroneously used for normal distributions (Code 7). The recipient's name on the form is the participant (rather than a beneficiary), and this has been going on for a number of years.

Other than the fact that the form is incorrect, what are the issues associated with using Code 4 when Code 7 should have been used (e.g., are there different state withholding rules for distributions on account of death)?