Can a 1099R really reduce your tax refund almost 100%?

It's not the 1099-R that reduces your refund, but rather the income you received which had insufficient withholding taken out. The 1099-R simply documents that you received income from a retirement plan (for example: a withdrawal from a 401(k) or IRA plan), and shows how much was withheld for income taxes. If not enough was withheld, and especially if the payment causes you to owe an early-withdrawal penalty, then you will have a smaller refund, or possibly have to write Uncle Sam a check.