1099-R distribution code U.

What the IRS says code U is

Table 1 says: "Use code U for a distribution of dividends from an employee stock ownership plan (ESOP) under section 404(k). These are not eligible rollover distributions." Its note: "Do not report dividends paid by the corporation directly to plan participants or their beneficiaries. Continue to report those dividends on Form 1099-DIV." The used-with column lists B.

The payer instructions say distributions of section 404(k) dividends from an ESOP, including a tax credit ESOP, are reported on Form 1099-R. Distributions other than 404(k) dividends from the plan must be reported on a separate Form 1099-R.

How it affects Form 1040

The 2025 Form 1040 instructions treat plan distributions such as 401(k) payments as pensions and annuities on lines 5a and 5b, using the Form 1099-R box 1 total on line 5a and the taxable amount on line 5b. This page does not claim an ESOP-dividend-specific entry because those instructions do not describe one.

If the corporation paid dividends straight to you, the form is a Form 1099-DIV, which is outside this code. If both plan dividends and other plan distributions reached you, you should have two Forms 1099-R.

Common mistakes

• Looking for a 1099-R when the company paid the dividend itself. That is Form 1099-DIV.
• Trying to roll the amount over. Table 1 states these are not eligible rollover distributions.
• Combining it with other plan payouts on one form. The instructions require a separate Form 1099-R for non-404(k) distributions.
• Pairing U with a code other than B. Table 1 lists only B.

Worked example

Illustration, not a real case. An ESOP passes $900 of dividends through the plan to a participant, who also receives a $20,000 plan payout in the same year. The participant should expect two Forms 1099-R: one with code U for the $900 and a separate one, with its own code, for the $20,000.

Related codes

Code U sits beside E, K, F. The full 1099-R distribution codes lookup lets you search every code; the other pages in this set are 6, 9, E, F, K, S, W.

Sources

Retrieved November 2, 2026. Review status: needed before this page is treated as final.

• IRS, Instructions for Forms 1099-R and 5498 (2026): Table 1, Guide to Distribution Codes, plus the box 1, 2a and 7a text.
• IRS, Instructions for Form 1040 (2025): lines 4a and 4b (IRA distributions) and 5a and 5b (pensions and annuities).

Form 1099-R changes for 2026: box 7 becomes box 7a. On forms for earlier years the code is in box 7. The Form 1040 instructions read are for tax year 2025.