State or local governments or a tax-exempt organization under IRC 501(c) are eligible to establish a 457(b) plan for its employees. These plans can either be eligible plans under IRC 457(b) or ineligible plans under IRC 457(f). Plans eligible under 457(b) allow employees of sponsoring organizations to defer income taxation on retirement savings into future years. Ineligible plans may trigger different tax treatment under IRC 457(f).
Withdrawals from a 457 plan would be entered in the TaxAct® program on the Form 1099-R. It is possible the Form 1099-R will have a Code 2 in Box 7.
To enter Form 1099-R Distributions from Retirement Plans into the program:
IRS Instructions for Forms 1099-R and 5498:
Governmental section 457(b) plan distributions. Generally, a distribution from a governmental section 457(b) plan is not subject to the 10% additional tax under section 72(t). However, an early distribution from a governmental section 457(b) plan of an amount that is attributable to a rollover from another type of eligible retirement plan or IRA is subject to the additional tax as if the distribution were from a plan described in section 401(a). See section 72(t)(9). If the distribution consists solely of amounts that are not attributable to such a rollover, enter Code 2 in Box 7. If the distribution consists solely of amounts attributable to such a rollover, then enter the appropriate code in Box 7 as if the distribution were from a plan described in section 401(a). If the distribution is made up of amounts from both sources, you must file separate Forms 1099-R for each part of the distribution unless Code 2 would be entered on each form.