Updated September 28, 2026. Quick answer: code N reports a recharacterization, moving a contribution you made for 2026 (with its earnings) from one type of IRA to another, traditional to Roth or Roth to traditional, in the same year, by a trustee-to-trustee transfer or with the same trustee. It is a relabelling of the contribution, not a taxable distribution.
What the IRS tells the payer
From the current instructions, code N is “Recharacterized IRA contribution made for 2026”. The full instruction text reads: “Use code N for a recharacterization of an IRA contribution made for 2026 and recharacterized in 2026 to another type of IRA by a trustee-to-trustee transfer or with the same trustee.” It may be used with: None.
Why nothing new is taxed
A recharacterization is treated as though the contribution had originally been made to the receiving IRA. Nothing was paid out to you, and the IRS instructions describe it purely as a transfer mechanic, with no explanation paragraph beyond the definition itself, unlike the corrective-distribution codes 8 and P.
Which line it drives
The current Form 1040 instructions give the precise handling. Among the Exception 2 cases, where you enter the total on line 4a and use Form 8606 and its instructions to figure line 4b: “You recharacterized part or all of a contribution to a Roth IRA as a contribution to a traditional IRA, or vice versa.” The Instructions for Form 8606 say to attach a statement to your return explaining the recharacterization.
Common mistakes
- Reporting the box 1 amount as taxable income. A properly recharacterized contribution is not a distribution.
- Forgetting to attach the required explanatory statement to your return.
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 8, and code R.
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), the IRS Instructions for Form 1040 (2025), and the IRS Instructions for Form 8606 (2025) 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
- IRS, Instructions for Form 1040 (2025): https://www.irs.gov/instructions/i1040gi
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.