Last Updated : January 14, 2009
  AutoEfile Home  Sitemap  Contact us   Print this page  Bookmark this page
Call for Support : 732.606.4476 7326988881 - SUPPORT
4972

Form 4972

Tax On Lump sum Distributions

PURPOSE OF THE FORM:

Use Form 4972 to figure the tax on a Qualified Lump sum Distribution the taxpayer received in 2007 using the 20% capital gain election, the 10 year tax option, or both. These are special formulas used to figure the a separate tax on the distribution that may result in a smaller tax than if he reported the taxable amount of the distribution as ordinary income.
The taxpayer may pay the tax only once, for the year he receives the distribution, not over the next 10 years. The separate tax is added to the regular tax figured on his other income.

QUALIFIED LUMPSUM DISTRIBUTION:
It is a distribution or payment in 1 tax year of a plan participant's entire balance from all of an employer's qualified plans of one kind. The participant's entire balance does not include deductible voluntary employee contributions or certain fortified amounts. The participant must be born before January 2, 1936.

PART -1: COMPLETE THIS PART TO SEE IF YOU CAN USE FORM 4972

Line 1 to Line 5:
Give answers to the questions asked in Part -1 by checking the appropriate checkbox YES or NO.
The questions which the taxpayer answers gives him result whether he can use form 4972 which can be read in description of the form itself.

PART -2: COMPLETE THIS PART TO CHOOSE THE 20% GAIN ELECTION

check the checkbox to choose the 20% capital gain election.


Line 6:
The taxpayer can select the capital gain election if his distribution from FORM 1099R includes capital gain. If form 1099R is added and form 1099R box 3 capital gain is entered then the program will enter the amount from FORM 1099R on this line.
However, if the taxpayer elects to include NUA in his taxable income, check the NUA checkbox and use NUA worksheet to figure the amount to enter on line 6.
If the taxpayer is taking a death benefit exclusion use the worksheet for it given in the bottom of page -1 to figure the amount to enter on this line.

Line 7:
The program calculates the amount by multiplying amount on line 6 by 20% and enters the result on this line.

PART -3: COMPLETE THIS PART TO CHOOSE THE 10-YEAR TAX OPTION
If along with the checkbox for 20% capital gain election checkbox for 10 year averaging is used then complete part 3 and go to line 8.

Line 8:
If form 1099R, box-2a is blank, then the taxpayer must first figure the taxable amount. For details refer Publication 575.
IF the taxpayer made a 20% capital gain election, the program will enter on this line only the ordinary income portion of the distribution. THe ordinary income portion is the amount from FORM 1099R, box 2a, minus the amount from box -3 of that form. add the amount from line F of the NUA worksheet if the taxpayer included NUA capital gain in the 20% capital gain election.
If the taxpayer did not make a 20% capital gain election and did not elect to include NUA in the taxable income, the program enters the amount from FORM 1099R box 2a. If the taxpayer did not make the 20% capital gain election but did elect to include NUA in his taxable income, the program adds the amount from FORM 1099R box 2a to the amount from FORM 1099R box 6 and enters the total on line 8.


Line 9:
Enter on line 9 inner box the taxpayer's share of death benefit exclusion.
If the checkbox for 10 year tax option is checked and if NUA checkbox is checked then the program enters the amount from worksheet at the bottom of the page . If the taxpayer does not elect to use the NUA option then the program enters the amount from line 9 inner box on the outer .

Line 10:
The program subtracts line 9 from line 8 and enters the result on this line.

Line 11:
If the taxpayer elects the 10 year tax option checkbox and on line 3 enters the percentage of beneficiary receipts then the program enters the % portion of Form 1099R box 8 on this line.

Line 12:
The program adds line 10 and line 11 and enter the total on this line.

Line 13:
If line 12 amount is less than $70000 then the program multiplies line 12 by 50% and enters on this line the result . BUt if the result is more than $10000 then maximum allowable is $10000.

Line 14:
If the amount on line 12 is less than $70000 but greater than $20000 then the program subtracts $20000 from line 12 amount and enters the result on this line. If line 12 is $20000 or less , then zero is set.

Line 15:
The program multiplies line 14 amount by 20% and enters on this line the result obtained.

Line 16:
The program subtracts line 15 from line 13 and enters the result on this line.

Line 17:
The program subtracts line 16 from line 12 and enters the result on this line.

Line 18:
Enter on line 17 inner box the taxpayer paid the federal tax on lump sum distribution.
If the checkbox for 10 year tax option is checked and if NUA checkbox is checked then the program enters the amount from worksheet at the bottom of the page named Federal estate tax worksheet.
If the taxpayer does not elect to use the NUA option then the program enters the amount from line 17 inner box on the outer .

Line 19:
The program subtracts line 18 from line 17 and enters the result on this line.

Line 20:
If line 11 is greater than zero then the program divides line 11 by line 12 and enters the result on this line.

Line 21:
The program multiplies line 16 amount by the decimal calculated on line 20 and enters the result on this line.

Line 22:
The program subtracts line 21 from line 11 and enters the result on this line.

Line 23:
The program multiplies line 19 by 10% and enters the result on this line.

Line 24:
The program calculates the tax based on the tax rate schedule given in instruction PDF of FORM 4972 for the amount on line 23 and enters the result on this line.

Line 25:
The program multiplies line 24 by 10 and enters the result on this line.

Line 26:
If line 11 is greater than zero then the program multiplies line 22 by 10% and enters the result on this line.

Line 27:
The program calculates the tax based on the tax rate schedule given in instruction PDF of FORM 4972 for the amount on line 26 and enters the result on this line.

Line 28:
The program multiplies line 27 by 10 and enters the result on this line.

Line 29:
The program subtracts line 28 from line 25 and enters the result on this line.

Line 30:
The program adds line 7 and line 29 and reports this amount on FORM 1040 page -2 line 43 (tax on Lump sum Distributions).
IF on line 3 % of beneficiary share is entered then the checkbox for Multiple recipient Distribution (MRD) gets checked. For details regarding Multiple Recipient Distribution Refer instruction PDF.

Supported States

Supported States

Federal CA CO CT GA
IL MD MI NC NM NJ
NY OH PA SC VT
     

Authorized IRS E-file Provider

Checkout with PayPal - FAST, EASY and SECURE