Help for item 7b.

Box 7. Distribution Code(s)
Enter an "X" in the IRA/SEP/SIMPLE checkbox if the distribution is from a traditional IRA, SEP IRA, or SIMPLE IRA. It is not necessary to check the box for a distribution from a Roth IRA or for an IRA recharacterization.

Enter the appropriate code(s) in box 7. Use the Guide to Distribution Codes on pages R-10 and R-11 to determine the appropriate code(s) to enter in box 7 for any amounts reported on Form 1099-R. Read the codes carefully and enter them accurately because the IRS uses the codes to help determine whether the recipient has properly reported the distribution. If the codes you enter are incorrect, the IRS may improperly propose changes to the recipient's taxes.

When applicable, enter a numeric and an alpha code. For example, when using Code P for a traditional IRA distribution under section 408(d)(4), you must also enter Code 1, if it applies. For a normal distribution from a qualified plan that qualifies for the 10-year tax option, enter Codes 7 and A. For a direct rollover to an IRA or a qualified plan for the surviving spouse of a deceased participant, enter Codes 4 and G.

Caution! Only three numeric combinations are permitted on one Form 1099-R: Codes 8 and 1, 8 and 2, or 8 and 4. If two or more other numeric codes are applicable, you must file more than one Form 1099-R. For example, if part of a distribution is premature (Code 1) and part is not (Code 7), file one Form 1099-R for the part to which Code 1 applies and another Form 1099-R for the part to which Code 7 applies. In addition, for the distribution of excess deferrals, excess contributions, or excess aggregate contributions, parts of the distribution may be taxable in 2 or 3 different years. File separate Forms 1099-R using Code 8, D, or P to indicate the year the amount is taxable.

Even if the employee/taxpayer is age 591/2 or over, use Code 1 if a series of substantially equal periodic payments was modified within 5 years of the date of the first payment (within the meaning of section 72(q)(3) or (t)(4)). For example, Mr. B began receiving payments that qualified for the exception for part of a series of substantially equal periodic payments under section 72(t)(2)(A)(iv) when he was 57. When he was 61, Mr. B substantially modified the payments. Because the payments were modified within 5 years, use Code 1 in the year the payments were modified, even though Mr. B is over 591/2.

Caution! For further guidance on what makes a series of substantially equal periodic payments, see Notice 89-25, 1989-1 C.B. 662, as modified by Rev. Rul. 2002-62, 2002-42 I.R.B. 710. Notice 2004-15, available on page 526 of Internal Revenue Bulletin 2004-9 at www.irs.gov/pub/irs-irbs/ irb04-09, allows taxpayers to use one of three methods in Notice 89-25, as modified by Rev. Rul. 2002-62, to determine whether a distribution from a nonqualified annuity is part of a series of substantially equal periodic payments under section 72(q)(2)(D).

If part of an eligible rollover distribution is paid in a direct rollover and part is not, you must file a separate Form 1099-R for each part showing the appropriate code on each form. If part of a distribution is an eligible rollover distribution and part is not (for example, a minimum distribution required by section 401(a)(9)) and the part that is an eligible rollover distribution is directly rolled over, you must file a separate Form 1099-R to report each part.

Section 457(b) plan distributions. Generally, a distribution from a governmental section 457(b) plan is not subject to the 10% additional tax under section 72(t). However, an early distribution from a governmental section 457(b) plan of an amount that is attributable to a rollover from another type of plan or IRA is subject to the additional tax as if the distribution were from a plan described in section 401(a). See section 72(t)(9). If the distribution consists solely of amounts that are not attributable to such a rollover, enter Code 2 in box 7. If the distribution consists solely of amounts attributable to such a rollover, then enter the appropriate code in box 7 as if the distribution were from a plan described in section 401(a). If the distribution is made up of amounts from both sources, you must file separate Forms 1099-R for each part of the distribution unless Code 2 would be entered on each form.

Guide to Distribution Codes
Distribution Codes	Explanations	*Used with code ...(if applicable)
1 - Early distribution, no known exception.	Use Code 1 only if the employee/taxpayer has not reached age 591/2, and you do not know if any of the exceptions under Distribution Code 2, 3, or 4 apply. Use Code 1 even if the distribution is made for medical expenses, health insurance premiums, qualified higher education expenses, or a first-time home purchase, under section 72(t)(2)(B), (D), (E), or (F). Code 1 must also be used even if a taxpayer is 591/2 or older and he or she modifies a series of substantially equal periodic payments under section 72(q), (t), or (v) prior to the end of the 5-year period.	8, D, L, or P
2 - Early distribution, exception applies.	Use Code 2 only if the employee/taxpayer has not reached age 591/2 and the distribution is: A Roth IRA conversion (an IRA converted to a Roth IRA). A distribution made from a qualified retirement plan or IRA because of an IRS levy under section 6331. A section 457(b) plan distribution that is not subject to the additional 10% tax. But see Section 457(b) plan distributions on page R-9 for information on distributions that may be subject to the 10% additional tax. A distribution from a qualified retirement plan after separation from service where the taxpayer has reached age 55. A distribution that is part of a series of substantially equal periodic payments as described in section 72(q), (t), or (v). Any other distribution subject to an exception under section 72(q), (t), or (v) that is not required to be reported using Code 1, 3, or 4.	8, D, or P
3 - Disability.	For these purposes, see section 72(m)(7).	None
4 - Death.	Use Code 4 regardless of the age of the employee/taxpayer to indicate payment to a decedent's beneficiary, including an estate or trust. Also use it for death benefit payments made by an employer butnot made as part of a pension, profit-sharing, or retirement plan.	8, A, D, G, L, or P
5 - Prohibited transaction.	Use Code 5 if there was a prohibited (improper) use of the account. Code 5 means the account is no longer an IRA.	None
6 - Section 1035 exchange.	Use Code 6 to indicate the tax-free exchange of life insurance, annuity, or endowment contracts under section 1035.	None
7 - Normal distribution.	Use Code 7: (a) for a normal distribution from a plan, including a traditional IRA, if the employee/taxpayer is at least age 591/2, (b) for a Roth IRA conversion or reconversion if the participant is at least age 591/2, and (c) to report a distribution from a life insurance, annuity, or endowment contract and for reporting income from a failed life insurance contract under sections 7702(g) and (h). See Rev. Rul. 91-17, 1991-1 C.B. 190. Use Code 7 with Code A, if applicable.Generally, use Code 7 if no other code applies. Do not use Code 7 for a Roth IRA distribution. Note: Code 1 must be used even if a taxpayer is 591/2 or older and he or she modifies a series of substantially equal periodic payments under section 72(q), (t), or (v) prior to the end of the 5-year period.	A
8 - Excess contributions plus earnings/ excess deferrals (and/or earnings) taxable in 2005.	Use Code 8 for an IRA distribution under section 408(d)(4), unless Code P applies. Also use this code for corrective distributions of excess deferrals, excess contributions, and excess aggregate contributions, unless Code D or P applies. See Corrective Distributions on page R-4 and IRA Revocation on page R-2 for more information.	1, 2, 4, or J
9 - Cost of current life insurance protection.	Use Code 9 to report premiums paid by a trustee or custodian for current life or other insurance protection. See Box 2a on page R-6 for more information.	None
A - May be eligible for 10-year tax option.	Use Code A only for participants born before January 2, 1936, or their beneficiaries to indicate the distribution may be eligible for the 10-year tax option method of computing the tax on lump-sum distributions (on Form 4972, Tax on Lump-Sum Distributions). To determine whether the distribution may be eligible for the tax option, you need not consider whether the recipient used this method (or capital gain treatment) in the past.	4 or 7
D - Excess contributions plus earnings/excess deferrals taxable in 2003.	See the explanation for Code 8. Generally, do not use Code D for an IRA distribution under section 408(d)(4) or 408(d)(5).	1, 2, or 4
E - Excess annual additions under section415/certain excess amounts under section 403(b) plans.	See Excess Annual Additions Under Section 415 on page R-4.	None
F - Charitable gift annuity.	See Charitable gift annuities on page R-6.	None
G - Direct rollover and rollover contribution.	Use Code G for a direct rollover from a qualified plan (including a governmental section 457(b) plan) or tax-sheltered annuity to an eligible retirement plan (another qualified plan, a tax-sheltered annuity, or an IRA). See Direct Rollovers on page R-2. Also use Code G for certain distributions from conduit IRAs to an employer plan and IRA rollover contributions to an accepting employer plan. See Conduit IRAs on page R-2.	4
J - Early distribution from a Roth IRA.	Use Code J for a distribution from a Roth IRA when Code Q or Code T does not apply. But use Code 2 for an IRS levy and Code 5 for a prohibited transaction.	8 or P
L - Loans treated as deemed distributions under section 72(p).	Do not use Code L to report a loan offset. See Loans Treated as Distributions on page R-5.	1 or 4
N - Recharacterized IRA contribution made for 2005.	Use Code N for a recharacterization of an IRA contribution made for 2005 and recharacterized in 2005 to another type of IRA by a trustee-to-trustee transfer or with the same trustee.	None
P - Excess contributions plus earnings/excess deferrals taxable in 2004.	See the explanation for Code 8. The IRS suggests that anyone using Code P for the refund of an IRA contribution under section 408(d)(4), including excess Roth IRA contributions, advise payees, at the time the distribution is made, that the earnings are taxable in the year in which the contributions were made.	1, 2, 4, or J
Q - Qualified distribution from a Roth IRA.	Use Code Q for a distribution from a Roth IRA if you know that the participant meets the 5-year holding period and: The participant has reached age 59 1/2, or The participant died, or The participant is disabled. Note: If any other Code, such as 8 or P applies, use Code J.	None
R - Recharacterized IRA contribution made for 2004.	Use Code R for a recharacterization of an IRA contribution made for 2004 and recharacterized in 2005 to another type of IRA by a trustee-to-trustee transfer or with the same trustee.	None
S - Early distribution from a SIMPLE IRA in the first 2 years, no known exception.	Use Code S only if the distribution is from a SIMPLE IRA in the first 2 years, the employee/taxpayer has not reached age 59 1/2, and none of the exceptions under section 72(t) are known to apply when the distribution is made. The 2-year period begins on the day contributions are first deposited in the individual's SIMPLE IRA. Do not use Code S if Code 3 or 4 applies.	None
T - Roth IRA distribution, exception applies.	Use Code T for a distribution from a Roth IRA if you do not know if the 5-year holding period has been met but: The participant has reached age 59 1/2, or The participant died, or The participant is disabled. Note: If any other Code, such as 8 or P applies, use Code J.	None
*See the Caution for box 7 instructions on page R-9.

1099 Recipient Instructions

Box 7. The following codes identify the distribution you received. 1-Early distribution, no known exception (in most cases, under age 591/2 ). See the Form 1040/1040A instructions and Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. For a rollover of the entire distribution, do not file Form 5329. See the Form 1040/1040A instructions for how to report the rollover. 2-Early distribution, exception applies (under age 591/2 )*. 3-Disability*. 4-Death*. 5-Prohibited transaction. 6-Section 1035 exchange (a tax-free exchange of life insurance, annuity, or endowment contracts). 7-Normal distribution. 8-Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2005. 9-Cost of current life insurance protection (premiums paid by a trustee or custodian for current insurance protection, taxable to you currently). A-May be eligible for 10-year tax option. See Form 4972. D-Excess contributions plus earnings/excess deferrals taxable in 2003. E-Excess annual additions under section 415 and certain excess amounts under section 403(b) plans. Report on Form 1040/1040A on the line for taxable pension or annuity income*. F-Charitable gift annuity. G-Direct rollover to a qualified plan, a tax-sheltered annuity, a governmental 457(b) plan, or an IRA. May also include a transfer from a conduit IRA to a qualified plan*. J-Early distribution from a Roth IRA, no known exception (in most cases, under age 591/2). Report on Forms 1040 and 8606 and see Form 5329. L-Loans treated as distributions. N-Recharacterized IRA contribution made for 2005 and recharacterized in 2005. Report on 2005 Form 1040/1040A and Form 8606, if applicable. P-Excess contributions plus earnings/excess deferrals taxable in 2004. Q-Qualified distribution from a Roth IRA. You are age 591/2 or over and meet the 5-year holding period for a Roth IRA. See the Form 1040/1040A instructions*. R-Recharacterized IRA contribution made for 2004 and recharacterized in 2005. Report on 2004 Form 1040/1040A and Form 8606, if applicable. S-Early distribution from a SIMPLE IRA in first 2 years, no known exception (under age 591/2 ). May be subject to an additional 25% tax. See Form 5329. T-Roth IRA distribution, exception applies. You are age 591/2 or over, disabled, or are the beneficiary of a participant who died. (You may not meet the 5-year holding period.) See the Form 1040/1040A instructions.

If the IRA/SEP/SIMPLE box is checked, you have received a traditional IRA, SEP, or SIMPLE distribution.

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