1099-R distribution code 2.

The exceptions behind code 2

In Table 1, Guide to Distribution Codes, the IRS tells payers to use code 2 only if the participant has not reached 59½ and the payer knows the distribution is one of the following: a Roth IRA conversion; a distribution because of an IRS levy under section 6331; a governmental section 457(b) plan distribution not subject to the additional 10% tax; a distribution from a qualified retirement plan after separation from service in or after the year the participant reached 55; a governmental plan distribution to a public safety employee after separation from service in or after the year the employee reached 50 or 25 years of service, whichever is earlier; the same age-50 or 25-years rule for firefighting services under a qualified, 403(a) or 403(b) plan; a series of substantially equal periodic payments under section 72(q), (t), (u) or (v); a permissible withdrawal under an eligible automatic contribution arrangement (EACA); any other exception under those sections not required to be reported with code 1, 3 or 4; and an employer-matching or nonelective contribution made to a Roth SEP IRA or Roth SIMPLE IRA.

Disability is code 3 and death is code 4. Those are separate codes, so a disability exception will not show up as code 2.

Roth conversion: code 2 or code 7

The box 7a instructions say to enter code 2 or 7 for a Roth IRA conversion depending on the participant's age. A conversion at 45 is code 2; a conversion at 62 is code 7. The conversion is taxable income, but the conversion itself is not subject to the 10% additional tax. The Form 5329 instructions list a distribution from a traditional IRA that was converted to a Roth IRA among the distributions not subject to the additional tax.

Conversions still carry a rule of their own: Form 5329 has a recapture amount for early Roth IRA distributions taken from converted amounts within the 5-year window. A later Roth withdrawal can therefore be taxed even though the conversion form showed code 2.

What to file

Because box 7 already shows an exception, the Form 5329 instructions have you file Form 5329 only when the exception does not cover the whole distribution or you meet a different exception than the one coded. In that case, enter the excluded amount on line 2 with the exception number, or 99 if more than one applies.

Worked example

Tom, age 54, leaves his employer in the year he turns 54 and takes $30,000 from his 401(k). The age-55 exception needs separation from service in or after the year he reaches 55, so the payer shows code 1, not 2. Had he left in the year he turned 55, the payer would know the exception applies and show code 2. That one-year difference decides whether the 10% additional tax is in play.

Where this code sits in the full table

This page covers one row of the IRS guide. The full 1099-R distribution codes lookup lets you search every code, and the neighbors of code 2 are worth a look: 1, 7, G, Q, 8, J, T, B.

Sources

Retrieved November 1, 2026.

• IRS, Instructions for Forms 1099-R and 5498 (2026): Table 1, Guide to Distribution Codes, and the box 7a, box 2a and Specific Instructions text on code 2.
• IRS, Instructions for Form 5329 (2025): Part I, additional tax on early distributions, the exception list (01 to 23) and Roth IRA distribution rules. This is the tax year 2025 edition, the latest read; the 2026 edition is published later.
• IRS, Instructions for Form 1040 (2025): Where IRA, pension and rollover amounts are reported.

Form 1099-R changes for 2026: box 7 becomes box 7a, and the IRS adds boxes 7b, 7c and 7d. On forms for earlier years the code is in box 7.