Form 4972

If you received a lump-sum distribution from a retirement plan, there are special tax treatments that can reduce your tax bill. To claim these benefits, you must file IRS Form 4972.

The IRS requires you to pay taxes when you withdraw funds from a tax-advantaged retirement account. For example, if you were born before 1936 and participated in the plan for at least five years before the distribution, you can elect to treat it as a capital gain. This treatment can reduce your federal income tax by up to 20 percent, But you can lessen your fiscal burden by declaring this lump-sum payout on Form 4972. This IRS form template works alongside your tax return to help you determine whether or not you qualify for a special treatment. Your employer’s retirement plan administrator will send you a Form 1099-R reporting the amount of your lump-sum distribution and any tax withholding. You will use this information to complete Form 4972. You must request this form before you receive the distribution to ensure your tax withholding is correct.

How to Fill out Form 4972
Form 4972 1

Form 4972 Eligibility Requirements

The first part of Form 4972 asks a series of questions to determine if you are eligible to use the form. It asks if the entire distribution was the same type of lump-sum withdrawal (from qualified pension, profit sharing, or stock bonus plans) as in previous years, whether any portion of the distribution was rolled over, and if you have used the form after 1986 for any previous distribution from a deceased plan participant.

If you do not meet any of these requirements, you cannot file Form 4972 and instead must report the entire distribution as ordinary income. The next part of the form explains how to calculate the tax. The instructions include tables with tax rates and amounts for all types of income. You also need to enter payment information, including the amount of the distribution and how you paid it.

How to Fill out Form 4972?

  • The first section of the form asks for personal information, including your name and social security number. You must enter this information carefully and double-check your entries to make sure that they are correct. If you are unsure of how to fill out this form, it is best to consult with a tax professional or refer to the IRS guidance materials for assistance.
  • In the second section of the form, you must provide information about the distribution you received. This includes the distribution amount and the taxpayer’s name. You must also indicate whether the distribution was taxable or not and provide any information you have regarding the amount of tax withheld from the distribution. You must also provide any additional information you have about the distribution, such as the plan type and the year it was received.
  • The final section of the form asks if the distribution qualifies for any special treatment. You can use this option to reduce the amount of tax you must pay on your distribution. You must answer either yes or no to each question. If you answer yes to any of the questions, you must attach Schedule G-1 to your tax return.

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