Multiple 1099-R forms are required if a payee receives more than one “type” of distribution as defined by the IRS regulations and if a payee received payments for more than one “Payee Type” (i.e. Retiree, DROP, Beneficiary, Survivor, ALT Payee). See below the IRS 1099-R Distribution codes which appear in Box 7 of the form 1099-R:
a) Age 59 ½ within the tax year: It is possible for you to receive two 1099-R forms in the year that you turn 59 ½. One will be coded distribution code “2” and the other code “7”.
Example: John Henry received twelve identical monthly checks from LASERS last year. He will receive two different 1099-R forms because within the year John turned 59 1/2. Up to that time he turns 59 1/2, his payments were classified as an early distribution code “2”per IRS rules. Once he reached age 59 1/2 his payments would be classified as a normal/regular distribution code “7”. Although the amount he received each month did not change, the “type” of benefit being paid did change from an early distribution to a normal retirement benefit because of his age. Next year, John will receive a single 1099-R covering all twelve months for a normal retirement benefit distribution code “7”.
b) Disability Retiree qualified for regular/normal retirement within the year:
It is possible for you to receive two 1099-R forms in the year that you change from a disability retiree to regular retirement. One will be coded distribution code “3” and the other code “7”. This only happens in the year that a disability retiree first qualifies and chooses to change to a normal/regular retirement.
Example: Sara Jane received twelve identical monthly checks from LASERS last year. She has received these checks since becoming eligible for a disability retirement three years ago. If at age 60 she chooses to change to regular retirement then she will receive two different 1099-R forms in XXXX. One with a distribution code ‘3’ in Box 7 for payments classified as disability benefits. The other 1099-R will cover payments for normal/regular retirement with a distribution code ‘7’ in Box 7. Although the amount she received each month did not change, the “type” of benefit being paid did change from a disability benefit to a normal/regular retirement benefit because of her age. Next year, Sara will receive a single 1099-R covering all twelve months for a normal/regular retirement distribution.
c) Deaths: Taxpayer/Payee who has passed away will receive a final 1099-R form on distributions made payable to them or to their estate during the year. Any survivor/beneficiary who received a distribution/payment during the year will also receive a 1099-R form under their own taxpayer identification number with a distribution code 4.
d) Rollover of Lump Sum funds (Refund, DROP, IBO, and Lump Sum Leave
Balance): Any money rolled over into a qualified plan such as a tax-sheltered annuity, a governmental 457(b) plan, or an IRA will generate a separate Form 1099-R from your service retirement Form 1099-R with a distribution code of “G”.
e) Lump Sum Leave Payments before the age of 55, code “1”: If you separated from employment before the year you turn 55 and you receive a lump sum leave payment before age 59 ½ you will receive two 1099-R forms. One will have a distribution code “1” for the lump sum leave payment and the other will have a distribution code “2” for your service retirement payments. Because lump sum leave payments are not part of a series of substantially equal payments as with your service retirement payments you will receive a distribution code “1”.