Form 4972 is a tax form used by the Internal Revenue Service (IRS) to calculate the tax on lump-sum distributions received from qualified retirement plans or annuities. A lump-sum distribution is a one-time payment of the entire balance of a retirement plan, often paid to a retiree at the time of retirement. The IRS requires that taxes be paid on these distributions, and Form 4972 is used to calculate the amount owed.
Who Needs to File Form 4972?
If you received a lump-sum distribution from a qualified retirement plan or annuity during the tax year, you may need to file Form 4972. This applies if you are the recipient of the distribution, or if you are the beneficiary of a deceased plan participant.
How to Fill Out Form 4972?
To fill out Form 4972, you will need the following information:
- The total amount of the lump-sum distribution
- The taxable amount of the distribution
- Your age at the time of the distribution
- The number of years over which the distribution would have been paid if it had not been
- received as a lump sum
- The interest rate used to calculate the distribution
- Any amounts previously received from the same plan or annuity
The form has three parts:
Part I: Tax on Lump-Sum Distributions
This section is used to calculate the tax on your lump-sum distribution. You will need to calculate your total tax liability and your tax liability if the distribution had been paid over a period of years. The difference between these two amounts is the tax on the lump-sum distribution.
Part II: Capital Gain Treatment
If you received a lump-sum distribution from a plan that was funded with after-tax dollars, you may be eligible for capital gain treatment. This section of the form is used to calculate the capital gain portion of the distribution.
Part III: Ordinary Income on Capital Gain Treatment
This section is used to calculate the ordinary income portion of the distribution if you are eligible for capital gain treatment.
Once you have completed the form, you will need to include it with your tax return.
Form 4972 must be filed by the due date of your tax return, including extensions. If you fail to file the form or file it incorrectly, you may be subject to penalties and interest.
If you have received a lump-sum distribution from a qualified retirement plan or annuity, it is important to properly calculate and pay the tax owed on the distribution. IRS Form 4972 is used to do this and must be filed with your tax return. Be sure to carefully review the instructions and seek the advice of a tax professional if necessary to ensure that you are accurately completing the form and avoiding any penalties or interest.
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