Get the free Form 4972

This form is used to calculate and report the tax on lump-sum distributions from qualified retirement plans, helping recipients determine if they qualify to use the form based on specific conditions.

How to fill out form 4972

How to fill out Form 4972

1. Obtain Form 4972 from the IRS website or a local IRS office.
2. Begin by entering your personal information at the top of the form, including your name, address, and Social Security number.
3. In Part I, report the distribution you received from your retirement plan.
4. Complete the calculations in Part II to determine your tax owed on the lump-sum distribution.
5. Fill out Part III to indicate the amount that qualifies for special tax treatment.
6. Review the instructions for any additional requirements or documentation needed.
7. Sign and date the form before submitting it to the IRS or including it with your tax return.

Who needs Form 4972?

1. Individuals who receive a lump-sum distribution from a qualified retirement plan after reaching the age of 59½.
2. Taxpayers who choose to report an eligible rollover distribution on Form 4972 instead of regular income tax.

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 the tax on lump-sum distributions from a qualified retirement plan, such as a 401(k) or an IRA.

Who is required to file Form 4972?

Individuals who receive a lump-sum distribution from a qualified retirement plan and choose to report the tax on that distribution using Form 4972 are required to file this form.

How to fill out Form 4972?

To fill out Form 4972, taxpayers need to provide information about the lump-sum distribution, including the total amount received, the tax basis, and any applicable deductions. Instructions included with the form will guide users through the process.

What is the purpose of Form 4972?

The purpose of Form 4972 is to calculate the federal income tax owed on lump-sum distributions from retirement plans, allowing taxpayers to determine their tax liability accurately.

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 tax basis of the amount, any contributions made to the plan, and details regarding any previous distributions during the tax year.