Updated September 28, 2026. Quick answer: code W reports an internal charge against the cash value of an annuity or the cash surrender value of a life insurance contract, used to pay for a combined long-term care insurance rider. No cash reaches you, and the IRS says explicitly that you do not need to report it on your return.
Read box by box from the IRS form text: Form 1099-R box 8.
What the IRS tells the payer
From the current instructions, code W is “Charges or payments for purchasing qualified long-term care insurance contracts under combined arrangements”. The full instruction text reads: “Use code W for charges or payments for purchasing qualified long-term care insurance contracts under combined arrangements that are excludable under section 72(e)(11) against the cash value of an annuity contract or the cash surrender value of a life insurance contract.” It may be used with: 6.
Why nothing is taxable here
Form 1099-R’s own recipient instructions could not be more direct: “If a charge or payment was made against the cash value of an annuity contract or the cash surrender value of a life insurance contract for the purchase of qualified long-term care insurance, an amount will be shown in this box and code W will be shown in box 7a. You need not report these amounts on your tax return.” The amount is excludable under section 72(e)(11), the same provision that lets these combined arrangements move value internally without triggering income.
Which line it drives
None. This is the rare box 1 entry the IRS tells you not to carry to your return at all.
Common mistakes
- Reporting a code W amount as taxable income on Form 1040. The instructions say explicitly that you need not report it.
- Confusing this internal, non-taxable charge with a taxable code 6 exchange, the code it is most often paired with.
Box 7 is the payer’s claim, not the law
The code in Box 7a records what the custodian knew when it cut the cheque. It is not a ruling on what you owe, and the IRS instructions say so in as many words. On code 1 the instruction to payers is to use it “even if the distribution is made for medical expenses, health insurance premiums, qualified higher education expenses, a first-time home purchase…” and a list of other genuine statutory exceptions.
Related codes worth reading alongside this one: code 9, code C, code U, and code 6, the 1035 exchange code W is paired with.
Every code in one place: the Box 7 table. If yours looks wrong: how to fix it.
Figures verified against the IRS Instructions for Forms 1099-R and 5498 (2026) and the IRS Form 1099-R recipient instructions on September 30, 2026.
Sources
- IRS, Instructions for Forms 1099-R and 5498 (2026), Table 1, Guide to Distribution Codes: https://www.irs.gov/instructions/i1099r
- IRS, Instructions for Form 5329 (2025): https://www.irs.gov/instructions/i5329
Code meanings are read from the IRS Instructions for Forms 1099-R and 5498 (current edition, tax year 2026), Table 1, Guide to Distribution Codes, at irs.gov on September 28, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS is the right place to confirm anything consequential.