1099 R Inherited IRA or 401K with 4 in Box 7

For an inherited retirement account, a Form 1099-R will typically report a "4," in box 7. If a "4" appears, it means you took a distribution from a tax-deferred retirement account and you are exempt from the early distribution penalty as the distributions were made after the original account holder's death.

If your 1099-R has a different code in box 7, such as "1," the issuing institution does not recognize that you are receiving payments as the decedent's beneficiary. In this case, to notify the IRS that the distribution is exempt from the early withdrawal penalty, you must file Form 5329 with your tax return and enter code "04" on line 2.

Whether or not your IRA or 401(k) distributions are taxable, you still have to report the money on your income tax return and you will be required to file Form 1040. IRA distributions on line 4a and 4b of Form 1040 are reported as non-taxable or taxable.