Get the free Form 4972

Figure your tax on the lump-sum whether or not you make the 20 capital gain election. Where to report. Report amounts from your Form 1099-R either directly on your tax return Form 1040 or 1041 or on Form 4972. If you do not use any part of Form 4972 report the entire amount from Form 1099-R box 1 Gross distribution on Form 1040 line 16a and the taxable amount on line 16b or on Form 1041 line 8. To at least three places Tax on amount on line 23. U...

How to fill out form 4972

How to fill out Form 4972

1. Obtain Form 4972 from the IRS website or your tax preparation software.
2. Fill out your personal information at the top of the form, including your name, address, and Social Security number.
3. Report the total eligible lump-sum distribution amount in Part I of the form.
4. Complete Part II by indicating the number of years over which you are electing to spread the tax.
5. Calculate the tax owed on the lump-sum distribution as instructed in the form.
6. Transfer the calculated amount to your tax return, as needed.
7. Review and double-check all entries for accuracy before submission.
8. Submit Form 4972 with your IRS tax return or separately if applicable.

Who needs Form 4972?

1. Individuals who receive a lump-sum distribution from a qualified retirement plan.
2. Taxpayers who want to take advantage of special tax treatments available for certain distributions.
3. Individuals who qualify under the 10-year averaging method for tax calculation.

People Also Ask about

What is the tax on Section 4972?

26 U.S. Code § 4972 - Tax on nondeductible contributions to qualified employer plans. In the case of any qualified employer plan, there is hereby imposed a tax equal to 10 percent of the nondeductible contributions under the plan (determined as of the close of the taxable year of the employer).

How is a lump sum settlement taxed?

The default assumption of the IRS is that money you get from legal settlements is money you have to pay taxes on. Section 61 of the tax code states that the IRS will count all money you receive as taxable income (including money from a legal settlement) unless there's an exception that applies.

How much tax is withheld from lump sum?

Withholding rates for lump-sum payments Use the following federal and provincial or territorial composite rates: 10% (5% for Quebec) on amounts up to and including $5,000. 20% (10% for Quebec) on amounts over $5,000 up to and including $15,000. 30% (15% for Quebec) on amounts over $15,000.

Are bonuses taxed at 22% or 40%?

The federal bonus tax withholding rate is typically 22%. However, employers could instead combine a bonus with your regular wages as though it's one of your usual paychecks—with your usual tax amount withheld. There are ways to reduce the tax impact of your bonus.

How do I avoid taxes on lump sum payout?

Strategies to Minimize Taxes on a Lump-Sum Payment Harvest Your Tax Losses. Tax-loss harvesting allows you to lock in investment losses for the express purpose of lowering your taxable income. Contribute to Tax-Deferred Accounts. Leverage Tax Credits and Deductions. Donate To Charity. Consider a Structured Settlement.

How do I avoid taxes on lump-sum distributions?

You may be able to defer tax on all or part of a lump-sum distribution by requesting the payer to directly roll over the taxable portion into an individual retirement arrangement (IRA) or to an eligible retirement plan.

What is form 4972 on a tax return?

If you were older than 59-1/2 before you received a lump sum from a qualified employee retirement plan, you may have some other options that can reduce your tax bill. To use any of these special treatments, you must complete IRS Form 4972, Tax on Lump-Sum Distributions, and attach it to your tax return.

How much tax will be taken for a lump-sum payout?

Additional options and considerations. If you take a lump-sum distribution, even using Form 4972, the retirement plan administrator typically withholds 20% of your withdrawal and sends it to the IRS on your behalf. If your ultimate tax liability is lower than 20%, you can claim that part back when you file your taxes.

For pdfFiller’s FAQs

What is Form 4972?

Form 4972 is a tax form used to report and calculate the tax due on a lump-sum distribution from a qualified retirement plan.

Who is required to file Form 4972?

Individuals who receive a lump-sum distribution from a qualified retirement plan, such as a pension or a 401(k), and want to report this distribution to determine the tax owed are required to file Form 4972.

How to fill out Form 4972?

To fill out Form 4972, individuals must provide details about the distribution received, the taxable amount, and calculate the tax using the appropriate tax rates. Instructions provided with the form should be followed carefully to ensure accuracy.

What is the purpose of Form 4972?

The purpose of Form 4972 is to allow individuals to report lump-sum distributions from retirement plans, and to calculate the tax owed on those distributions, if applicable.

What information must be reported on Form 4972?

Information that must be reported on Form 4972 includes the amount of the lump-sum distribution, the amount that is taxable, the basis in the plan, and any applicable tax rates that may apply to the distribution.