Fillable Form 4972 - Tax On Lump-Sum Distributions

Page

Form 4972 (2014)

Section references are to the Internal

• U.S. Retirement Plan Bonds distributed

1. If you do not use Form 4972, and you

Revenue Code.

with the lump sum.

file:

Future developments. For the latest

• A distribution made during the first 5 tax

a. Form 1040. Report the entire amount

information about developments related to

years that the participant was in the plan,

from box 1 (Gross distribution) of Form

Form 4972 and its instructions, such as

unless it was paid because the participant

1099-R on line 16a, and the taxable

legislation enacted after they were

died.

amount on line 16b. If your pension or

published, go to

annuity is fully taxable, enter the amount

• The current actuarial value of any annuity

from box 2a (Taxable amount) of Form

contract included in the lump sum (Form

General Instructions

1099-R on line 16b; do not make an entry

1099-R, box 8, should show this amount,

on line 16a.

which you use only to figure tax on the

Purpose of Form

ordinary income part of the distribution).

b. Form 1040NR. Report the entire

Use Form 4972 to figure the tax on a

amount from box 1 (Gross distribution) of

• A distribution to a 5% owner that is subject

qualified lump-sum distribution (defined

Form 1099-R on line 17a, and the taxable

to penalties under section 72(m)(5)(A).

below) you received in 2014 using the 20%

amount on line 17b. If your pension or

• A distribution from an IRA.

capital gain election, the 10-year tax

annuity is fully taxable, enter the amount

• A distribution from a tax-sheltered

option, or both. These are special formulas

from box 2a (Taxable amount) of Form

annuity (section 403(b) plan).

used to figure a separate tax on the

1099-R on line 17b; do not make an entry

• A distribution of the redemption proceeds

distribution that may result in a smaller tax

on line 17a.

of bonds rolled over tax free to a qualified

than if you reported the taxable amount of

c. Form 1041. Report the amount on

pension plan, etc., from a qualified bond

the distribution as ordinary income.

line 8.

purchase plan.

You pay the tax only once, for the year

2. If you do not use Part III of Form 4972,

• A distribution from a qualified plan if the

you receive the distribution, not over the

but use Part II, report only the ordinary

participant or his or her surviving spouse

next 10 years. The separate tax is added to

income portion of the distribution on Form

previously received an eligible rollover

the regular tax figured on your other

1040, lines 16a and 16b; on Form 1040NR,

distribution from the same plan (or another

income.

lines 17a and 17b; or on Form 1041, line 8.

plan of the employer that must be

Related Publications

The ordinary income portion is the amount

combined with that plan for the lump-sum

Pub. 575, Pension and Annuity Income.

from box 2a of Form 1099-R, minus the

distribution rules) and the previous

amount from box 3 of that form.

Pub. 721, Tax Guide to U.S. Civil Service

distribution was rolled over tax free to

Retirement Benefits.

another qualified plan or an IRA.

3. If you use Part III of Form 4972, do not

include any part of the distribution on Form

Pub. 939, General Rule for Pensions and

• A distribution from a qualified plan that

1040, lines 16a and 16b; on Form 1040NR,

Annuities.

received a rollover after 2001 from an IRA

lines 17a and 17b; or on Form 1041, line 8.

(other than a conduit IRA), a governmental

What Is a Qualified Lump-Sum

section 457 plan, or a section 403(b) tax-

The entries in other boxes on Form

Distribution?

sheltered annuity on behalf of the plan

1099-R may also apply in completing

It is the distribution or payment in 1 tax

participant.

Form 4972.

year of a plan participant’s entire balance

• A distribution from a qualified plan that

• Box 6 (Net unrealized appreciation in

from all of an employer’s qualified plans of

received a rollover after 2001 from another

employer’s securities). See Net unrealized

one kind (for example, pension, profit-

qualified plan on behalf of that plan

appreciation (NUA), later.

sharing, or stock bonus plans) in which the

participant’s surviving spouse.

• Box 8 (Other). Current actuarial value of

participant had funds. The participant’s

• A corrective distribution of excess

an annuity.

entire balance does not include deductible

deferrals, excess contributions, excess

voluntary employee contributions or certain

How Often You Can Use Form 4972

aggregate contributions, or excess annual

forfeited amounts. The participant must

After 1986, you can use Form 4972 only

additions.

have been born before January 2, 1936.

once for each plan participant. If you

• A lump-sum credit or payment under the

Distributions upon death of the plan

receive more than one lump-sum

alternative annuity option from the Federal

participant. If you received a qualified

distribution for the same participant in 1 tax

Civil Service Retirement System (or the

distribution as a beneficiary after the

year, you must treat all those distributions

Federal Employees’ Retirement System).

participant’s death, the participant must

the same way. Combine them on a single

How To Report the Distribution

have been born before January 2, 1936, for

Form 4972.

If you can use Form 4972, attach it to Form

you to use this form for that distribution.

If you make an election as a beneficiary

1040 (individuals), Form 1040NR

Distributions to alternate payees. If you

of a deceased participant, it does not affect

(nonresident aliens), or Form 1041 (estates

are the spouse or former spouse of a plan

any election you can make for qualified

or trusts). The payer should have given you

participant who was born before January 2,

lump-sum distributions from your own

a Form 1099-R or other statement that

1936, and you received a qualified lump-

plan. You can also make an election as the

shows the amounts needed to complete

sum distribution as an alternate payee

beneficiary of more than one qualifying

Form 4972. The following choices are

under a qualified domestic relations order,

person.

available.

you can use Form 4972 to figure the tax on

Example. Your mother and father died

20% capital gain election. If there is an

the distribution using the 20% capital gain

and each was born before January 2, 1936.

amount in Form 1099-R, box 3, you can

election, the 10-year tax option, or both.

Each had a qualified plan of which you are

use Form 4972, Part II, to apply a 20% tax

For details, see Pub. 575.

the beneficiary. You also received a

rate to the capital gain portion. See Capital

qualified lump-sum distribution from your

Distributions That Do Not Qualify for

Gain Election, later.

own plan and you were born before

the 20% Capital Gain Election or the

10-year tax option. You can use Part III to

January 2, 1936. You can make an election

10-Year Tax Option

figure your tax on the lump-sum distribution

for each of the distributions; one for

The following distributions are not qualified

using the 10-year tax option whether or not

yourself, one as your mother’s beneficiary,

lump-sum distributions and do not qualify

you make the 20% capital gain election.

and one as your father’s beneficiary. It

for the 20% capital gain election or the

Taxable amount. If Form 1099-R, box 2a,

does not matter if the distributions all occur

10-year tax option.

is blank, you must figure the taxable

in the same year or in different years. File a

amount to complete Form 4972. For

• The part of a distribution not rolled over if

separate Form 4972 for each participant’s

details, see Pub. 575.

the distribution is partially rolled over to

distribution.

another qualified plan or an IRA.

Where to report. Report amounts from

• Any distribution if an earlier election to

your Form 1099-R either directly on your

use either the 5- or 10-year tax option had

tax return (Form 1040, 1040NR, or 1041) or

been made after 1986 for the same plan

on Form 4972.

participant.

Form 4972 - Tax On Lump-Sum Distributions - 2014 Page 2

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