I have a client that moved money they had in an IRA to an IRA in a different bank. They received a 1099-R from the bank it was moved from with a code '7' in box 7. They deposited the money themselves into the other IRA within the proper time frame,

The withholding scenario is affected by direct or indirect and how the payee is listed for indirect and how the paperwork is filled out. Yes, there is a default of withholding.

https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions

"Will taxes be withheld from my distribution?

• IRAs: An IRA distribution paid to you is subject to 10% withholding unless you elect out of withholding or choose to have a different amount withheld. You can avoid withholding taxes if you choose to do a trustee-to-trustee transfer to another IRA.
   
• Retirement plans: A retirement plan distribution paid to you is subject to mandatory withholding of 20%, even if you intend to roll it over later. Withholding does not apply if you roll over the amount directly to another retirement plan or to an IRA. A distribution sent to you in the form of a check payable to the receiving plan or IRA is not subject to withholding.

How much can I roll over if taxes were withheld from my distribution?

If you have not elected a direct rollover, in the case of a distribution from a retirement plan, or you have not elected out of withholding in the case of a distribution from an IRA, your plan administrator or IRA trustee will withhold taxes from your distribution. If you later roll the distribution over within 60 days, you must use other funds to make up for the amount withheld."

Always do due diligence.

Agree to disagree, Bob. The 1099-R Code 7 does not show that the rollover happened within 60 days.

Neither does the 5498.