Form 1099-R and Pension Rollovers: How to Report It on Your Taxes

You rolled over your pension lump sum — and now you have a 1099-R showing $600,000 of "distributions." Your tax software is asking if you owe tax. You don't — if you did it right. Here's exactly what to enter and why.

If you did a direct rollover (trustee-to-trustee): Box 2a of your 1099-R should be $0. On Form 1040, you report the gross amount on Line 5a and $0 on Line 5b, then check the "Rollover" box at Line 5c. Federal income tax owed on the rollover: $0.

What is a Form 1099-R?

Form 1099-R is the IRS information return that pension plan administrators send whenever money leaves a qualified retirement plan. Your plan is legally required to issue it by January 31 of the year following the distribution — so a rollover executed in 2025 produces a 1099-R you receive in January 2026 for your 2025 tax return, and a 2026 rollover produces one you receive in January 2027.

The form reports what came out of the plan. It doesn't know — or automatically tell the IRS — whether you subsequently completed a rollover. That's your job to communicate on Form 1040. A large number in Box 1 is not a tax bill; it's a statement of fact that money left the plan.

The boxes that matter for pension rollovers

Box	What it shows	What to expect for a direct rollover
Box 1 Gross distribution	Total dollars that left the plan	Your full lump-sum amount — e.g., $750,000
Box 2a Taxable amount	What the plan administrator reports as taxable	$0 for a direct rollover. If it shows the full amount or "taxable amount not determined," see the note below.
Box 2b Taxable amount not determined	Checked when the plan can't compute the taxable portion	May be checked even for direct rollovers; doesn't mean you owe tax — it means you must determine the taxable amount (which is $0 for a complete direct rollover)
Box 4 Federal income tax withheld	Mandatory 20% withheld if you took an indirect distribution (check made to you)	$0 for a proper direct rollover. If this box shows a dollar amount, you took an indirect distribution — see the 20% trap section below.
Box 5 Employee contributions / basis	After-tax contributions you made to the plan	Relevant for FERS, CSRS, teachers, and other plans with mandatory employee contributions. This portion is tax-free on distribution.
Box 6 Net unrealized appreciation	NUA on employer stock distributed in-kind	Blank unless you elected the NUA treatment — only applies to employer stock distributed as shares, not cash
Box 7 Distribution code	One or two letter/number codes telling the IRS the type of distribution	See codes table below — the code determines whether penalties apply
Box 14–16 State / local	State tax withheld and state distribution amount	Varies by state. Used for state income tax return — not federal.

Box 2a shows the full distribution amount, not $0 — is that a problem? Not necessarily. Some plan administrators check "Taxable amount not determined" (Box 2b) and leave Box 2a blank or equal to Box 1 even for direct rollovers. The code in Box 7 (G for direct rollover) is what the IRS uses to confirm no tax is owed. If Box 7 shows G and Box 2a shows the full amount, report Box 1 on Form 1040 Line 5a and $0 on Line 5b — the Box 7 code overrides the Box 2a figure.

Box 7 distribution codes for pension lump sums

Code	Meaning	10% early withdrawal penalty?	Tax owed immediately?
G	Direct rollover of eligible rollover distribution to IRA or employer plan¹	No	No
H	Direct rollover of designated Roth amount to Roth IRA (i.e., Roth pension/plan to Roth IRA)	No	No (already after-tax)
1	Early distribution — you are under 59½ and no exception applies	Yes — 10%	Yes — ordinary income + penalty
2	Early distribution — exception applies (includes Rule of 55 for separations at 55+, SEPP 72(t), disability)	No (exception applies)	Yes — ordinary income, no penalty
7	Normal distribution — you are 59½ or older, or age 55+ if Code 2 exception applies	No	Yes — ordinary income in year received (unless rolled over)
4	Death — distribution to a beneficiary	No (death exception under IRC §72(t)(2)(A)(ii))	Yes — ordinary income; beneficiary follows inherited IRA rules
M	Qualified plan loan offset — a defaulted plan loan treated as a distribution	Possibly (if under 59½ with no other exception)	Yes — but SECURE 2.0 allows rollover of the offset amount into an IRA by tax deadline + extensions
L	Loans treated as distributions — plan loan that doesn't meet requirements	Possibly	Yes — not rollover eligible

Two-code combinations: Box 7 sometimes shows two codes (e.g., "1, G" or "G, 8"). This is normal. The combination tells the IRS the nature of each component — for example, if part of a distribution was rolled over and part was not.

How to report a pension rollover on Form 1040 (2025 tax year)

IRS Form 1040 for tax year 2025 (filed January–April 2026) uses Lines 5a, 5b, and 5c for pension and annuity income:²

Line	What to enter	Example: $750K direct rollover
Line 5a — Pensions and annuities (total)	Box 1 of your 1099-R — the gross distribution amount	$750,000
Line 5b — Taxable amount	The portion that is taxable this year — $0 for a complete direct rollover to a traditional IRA	$0
Line 5c — Checkboxes (new 2025 form)	Check box "1 — Rollover" to flag this as a rollover distribution. This replaced the old practice of writing "ROLLOVER" in the margin.	Check box 1 (Rollover)

If the distribution went to an IRA (indirect rollover completed within 60 days): The reporting is the same — Line 5a shows the full amount, 5b shows $0, 5c Rollover checked. The 1099-R Box 7 code may be 7 or 1 (not G) since the plan issued a check to you, not to the IRA. You still complete the rollover by depositing into the IRA within 60 days — you report the full amount on 5a and $0 on 5b to claim the rollover.

What about IRA-to-IRA rollovers? If you're rolling from one IRA to another, the 1099-R goes on Lines 4a and 4b (not 5a/5b), which are for IRA distributions specifically. Pension and 401(k)-type qualified plan distributions use Lines 5a/5b. The mechanics are otherwise identical.

The 20% withholding trap — and what to do if it happened to you

Under IRC §3405(c)(1), if your pension plan issues a check payable to you rather than directly to the IRA custodian, the plan is legally required to withhold 20% of the distribution for federal taxes.³ This is not optional — the plan cannot skip it at your request.

How the trap works:

You take a $600,000 distribution. The plan withholds 20% = $120,000 and sends you a check for $480,000.
You have 60 days to deposit the full $600,000 into the IRA to complete a tax-free rollover.
You can deposit the $480,000 check — but you are still $120,000 short. You must come up with that $120,000 from other savings and deposit it too, within the 60-day window.
If you only roll over $480,000, the $120,000 that was withheld becomes a taxable distribution — ordinary income in the year of distribution, plus a 10% early withdrawal penalty if you're under 59½.

What your 1099-R shows in this scenario:

Box 1: $600,000 (total distribution)
Box 2a: May show $120,000 or $0 depending on how you handled the rollover
Box 4: $120,000 (the amount withheld)
Box 7: Likely "7" (normal distribution) or "1" (early distribution) — not "G"

If you deposited the full $600,000 into the IRA within 60 days (replacing the withheld $120,000 from savings): report $600,000 on Line 5a, $0 on Line 5b, check Rollover box at 5c. The $120,000 shown in Box 4 becomes a credit against any tax you owe — or a refund if you owe less than $120,000.

If you only rolled over $480,000 (the check amount): the $120,000 that was withheld is a taxable distribution. Report $600,000 on Line 5a, $120,000 on Line 5b, do not check the Rollover box for that portion. Box 4 ($120,000) is still a withholding credit — but it offsets a real tax liability, not a phantom one.

Multiple 1099-Rs in the same year

It is common to receive two or more 1099-Rs in a single year. Each requires its own entry on your tax return, but they can be combined on Line 5a and 5b if your tax software allows. Scenarios that produce multiple forms:

Pension lump sum + TSP rollover in the same year. Each plan issues its own 1099-R. The pension is on Lines 5a/5b; TSP distributions (if rolled to IRA) are also 5a/5b.
Annuity payments you were receiving before the rollover decision. If you received any monthly payments before deciding to roll over the remaining lump sum, those early payments generate their own 1099-R showing ordinary income.
Partial rollover. If you rolled over part of the lump sum and took the rest as cash, you may receive one 1099-R with two distribution codes, or two separate forms.
State pension + federal pension in the same year. If you worked for both a state employer and a federal employer at different points in your career, you may have distributions from both plans.

After-tax contributions and the Simplified Method

If you made mandatory after-tax contributions to your pension plan — common in FERS, CSRS, public school teacher pensions, and police/fire plans — Box 5 of your 1099-R will show your "employee contributions or insurance premiums." This amount is your basis: you already paid tax on it, so it is not taxed again on distribution.

For rollovers: if you roll the entire balance to a traditional IRA, the basis follows you into the IRA and is tracked on Form 8606. When you later take IRA withdrawals, you use the pro-rata rule to determine the taxable vs. tax-free portion.

For annuity payments (if you took the annuity instead of the lump sum): you use the IRS Simplified Method under IRC §72(d)(1) to compute the monthly exclusion amount — your basis divided by an expected-payments factor from the IRS table. Our Simplified Method Calculator walks through this computation.

NUA — when Box 6 shows a number

Box 6 (Net unrealized appreciation) only applies if your pension plan held employer stock and you elected to distribute those shares in-kind rather than rolling them to an IRA. In that case, the NUA — the difference between the stock's fair market value and the plan's cost basis in those shares — is eligible for long-term capital gains treatment rather than ordinary income rates.

If Box 6 is blank, NUA does not apply to your distribution. For a standard pension cash-out or rollover where no employer stock was distributed as shares, Box 6 will always be blank. See our NUA Election Calculator for the math when Box 6 does apply.

Common 1099-R pension rollover mistakes

Mistake	What actually happens	How to fix it
Entering Box 1 as fully taxable on Line 5b	Tax software interprets the entire distribution as ordinary income — a six-figure phantom tax bill	Enter Box 1 on Line 5a; enter $0 (or the actually-taxable amount) on 5b; check the Rollover box on 5c
Not reporting the 1099-R at all (thinking the rollover means no filing)	The IRS receives the 1099-R from your plan. Omitting it triggers a CP2000 notice	Always report the 1099-R. The rollover is shown by entering $0 on Line 5b, not by skipping the form
Missing the 60-day rollover deadline and not applying for a waiver	The distribution becomes fully taxable; missed deadline is difficult to reverse	File for a 60-day waiver with the IRS under Rev. Proc. 2020-46 (self-certification) if you missed due to financial institution error, medical emergency, or other qualifying reason
Rolling funds to a Roth IRA by mistake (thinking it's the same as a traditional IRA)	Pre-tax pension funds rolled to a Roth IRA trigger a taxable conversion — the entire amount is ordinary income in year of rollover	Recharacterization to traditional IRA is not available for these rollovers. Proceed intentionally — Roth conversion math is in our Roth Rollover Guide
Forgetting that the withheld 20% is a refundable tax credit	Leave money on the table — the 20% withheld should reduce your tax liability or generate a refund	Report Box 4 withholding on Form 1040 Line 25b (other withholding)
Counting the same dollar twice on rollovers between accounts in same year	If you rolled from pension → IRA and then converted IRA → Roth in the same year, you receive two 1099-Rs for the same money. Incorrect double-counting inflates income	Report each 1099-R separately. The pension→IRA rollover is $0 taxable; the IRA→Roth conversion creates taxable income only on the conversion 1099-R

Special situations

FERS and CSRS employees

Federal employees who take a contribution refund (returning the money they contributed to FERS or CSRS) receive a 1099-R. The contribution amount itself (Box 5) is after-tax basis — not taxable. Any interest on those contributions is taxable. The refund is rollover-eligible; the direct rollover to an IRA uses Code G and reports Box 1 on Line 5a with $0 on Line 5b.

DROP plan distributions

Deferred Retirement Option Program (DROP) participants who separate and take their DROP account as a lump sum receive a 1099-R. Most DROP accounts are pre-tax; the lump sum is rollover-eligible. Code G for a direct rollover; Code 7 (normal) or Code 2 (early with exception) for a distribution taken before rolling. See our DROP Plan Retirement Guide for mechanics.

QDRO distributions to alternate payees

A spouse or former spouse who receives a pension distribution via a Qualified Domestic Relations Order (QDRO) also receives a 1099-R. The distribution is in the alternate payee's name and SSN. It is rollover-eligible to the alternate payee's own IRA (not their employer plan). Code 1 (no exception) applies if the alternate payee is under 59½ — but unlike other Code 1 distributions, there is an explicit QDRO exception at IRC §72(t)(2)(C) that waives the 10% penalty.

Related guides

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Sources

IRS — 2025 Instructions for Forms 1099-R and 5498. Code G: direct rollover of an eligible rollover distribution to an IRA or qualified plan. Box 2a reports $0 for a direct rollover; Box 7 code G is the controlling indicator of rollover treatment.
IRS — Instructions for Form 1040 (2025). Lines 5a, 5b report pension and annuity gross and taxable amounts. Line 5c checkbox "1 — Rollover" is the 2025 form's replacement for the prior "ROLLOVER" written notation. Report Box 1 on 5a; $0 on 5b for a complete direct rollover; check box 1 on 5c.
IRS Publication 575 (2025) — Pension and Annuity Income. Authoritative source for pension rollover reporting, the 20% mandatory withholding rule under IRC §3405(c)(1), the 60-day rollover period, and after-tax contribution (basis) recovery rules.
IRS — Rollovers of Retirement Plan and IRA Distributions. Direct rollover mechanics, 60-day rule, and the one-rollover-per-year limit for IRA-to-IRA rollovers (does not apply to trustee-to-trustee transfers from pension plans).
IRS Rev. Proc. 2020-46 — Self-Certification for Missed 60-Day Rollover Deadline. Lists 11 qualifying reasons (financial institution error, postal delay, death, medical emergency, etc.) for which a taxpayer may self-certify eligibility for a waiver without a private letter ruling.

Reporting mechanics verified against 2025 IRS instructions for Form 1099-R and Form 1040. Tax law changes frequently; if your 1099-R situation is complex (basis recovery, NUA election, QDRO, multiple distributions), consult a CPA or fee-only advisor before filing. Values verified as of June 2026.