1099-R ESOP diversification distribution

[Guest crosseyetester]

A participant was first eligible to diversify a part of his account in his company's ESOP. So the ESOP distributed to him the stock shares which he immediately redeemed for the cash value and a check was written directly to him. Because of the process, there was no 20% withholding. For purposes of form 1099-R what would the Distribution Code be? He is under 59 1/2 so I'm guessing it is simply code '1'. Is that correct?

[A Shot in the Dark]

Yes that is correct. 1 would be the correct code.

[Guest crosseyetester]

The 1099 program spits out an error because this distribution did not have a 20% withholding. Just wanted to check that that will not be a problem to the IRS and we should go ahead and file it. It also makes me wonder if we should be filing another form 1099 such as maybe 1099-B? The cash was paid by the corporation, not the esop.