By Theresa Cagle Fry, Manager, IRAs, Retirement & Education Planning
In early February, if you received a distribution from your IRA or your workplace retirement plan, or you completed a rollover, you’ll receive Form 1099-R. And if you’ve ever looked at that form and felt confused, you’re not alone. Amounts shown as “taxable” aren’t always taxable. Distributions reported as “early” don’t always trigger the 10% IRS penalty. In fact, several common types of distributions require self-reporting your specific circumstances on your income tax return, to ensure taxes and penalties are applied correctly.
If your Form 1099-R doesn’t look the way you expected, don’t panic. Below are several situations where the form is accurate even though you’ll have additional reporting on your tax return.
When Your 1099-R Doesn’t Need to Be Corrected
1.) Rollovers Between IRAs
If you take a distribution from an IRA and roll it into the same or another IRA within 60 calendar days, the transaction is generally tax free—provided you haven’t completed another IRA-to-IRA rollover in the past 12 months and you roll over the same “property” that was distributed to you.
It’s important to remember:
- Form 1099-R only reports what left your IRA, not what was rolled into the next IRA.
- Your rollover deposit is reported separately on Form 5498, which arrives in May. Keep it for your records—it serves as supporting documentation as does your account statement to prove when your rollover was completed.
You (or your tax professional) must self-report the rollover on your income tax return. IRS instructions explain exactly how to do this.
2.) Qualified Charitable Distributions (QCDs)
If you are age 70 ½ or older, you can make tax-free charitable gifts directly from your IRA. These gifts, called QCDs, allow you to exclude up to $108,000 from your taxable income in 2025.
Even though QCDs are tax free:
- They still will appear on Form 1099-R as taxable.
- You must follow IRS instructions to correctly report the QCD on your tax return.
- You cannot also take a tax deduction for the QCD as a charitable gift.
- The charity should provide a receipt, which you should keep with your tax records.
The IRS made a few changes to the way QCDs are reported recently. These changes were not required for 2025 QCDs, but in the future your 1099-R will include a new code in Box 7 to identify the charitable gift.
3.) Distributions of Non-Deductible Contributions
If you’ve made non-deductible IRA contributions in past years, you have after-tax dollars (basis) in your traditional IRA. IRS Form 8606 would have been used to keep track of the after-tax dollars in your IRA, so you do not pay taxes on them twice—on the way in and on the way out.
When you take an IRA distribution:
- Taxable and non-taxable amounts are prorated.
- Form 1099-R will not break down the taxable and non-taxable amounts.
- You’ll use Form 8606 again to determine how much of the distribution is taxable and how much non-deductible basis remains in your IRA.
4.) Exceptions to the 10% Early Withdrawal Penalty
If you were younger than age 59 ½ when you received your distribution last year, a 10% early withdrawal penalty may apply—but there are many exceptions that require self-reporting.
Common exceptions include:
- Disability – Distributions you receive after becoming disabled (not all disabilities qualify)
- Substantially Equal Periodic Payments – Sometimes referred to as 72(t) distributions
- First-Time Home Purchase – Limited to $10,000
- Qualified Higher Education Expenses – Used for certain college expenses for you, your spouse, your children or grandchildren
- Qualified Disaster-Related Expenses – Limited to $22,000 per federally-declared disaster
- Qualified Birth or Adoption Expenses – Limited to $5,000 per child
- Qualified Emergency Withdrawals – Limited to $1,000 per year, if repaid
Because your financial institution typically reports these as “early distribution, no known exception” on Form 1099-R (since they can’t know if you meet the exception conditions), you must use Form 5329 to document the exception that applies in your situation.
Before You File, Ask Yourself These Questions
- Did you complete an IRA-to-IRA rollover?
- Did you make a Qualified Charitable Distribution?
- Have you made non-deductible IRA contributions in the past?
- Are you younger than age 59 ½ and eligible for a penalty exception?
If you answered “yes” to any of these, your 1099-R may look misleading – but the form is likely correct. Follow the IRS instructions and report your specific circumstances, using additional forms where appropriate.
We’re Here to Help
Tax season can be confusing and stressful. Your Benjamin F. Edwards financial advisor can work with you and your tax professional to help you navigate these situations with confidence.
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.