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Form 4972 is used to calculate the tax on qualified lump-sum distributions received in 2003 from employer-sponsored retirement plans for participants born before January 2, 1936. It allows taxpayers to elect a 20% capital gain treatment or a 10-year tax option, potentially resulting in lower taxes compared to reporting the distribution as ordinary income. The form includes specific eligibility criteria, instructions for reporting, and details on how to handle distributions that do not qualify for these options.

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Who qualifies for lump-sum distribution?

In general, distributions from qualified plans are treated as lump sums if the total plan balance is distributed over the same tax year, and if the distribution is made as a result of the employee: Attaining age 59 Being deceased (applicable to beneficiaries)

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

Mandatory withholding Mandatory income tax withholding of 20% applies to most taxable distributions paid directly to you in a lump sum from employer retirement plans even if you plan to roll over the taxable amount within 60 days. Note that the default rate of withholding may be too low for your tax situation.

Who can use Form 4972?

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.

Who should file form 4972?

If you are the spouse or former spouse of a plan participant who was born before January 2, 1936, and you received a qualified lump-sum distribution as an alternate payee under a qualified domestic relations order, you can use Form 4972 to figure the tax on the distribution using the 20% capital gain election, the 10-

Who can use qualified dividends and capital gain tax worksheet?

The worksheet is for taxpayers with dividend income only or those whose only capital gains are capital gain distributions reported in box 2a or 2b of Form 1099-DIV that were received from mutual funds, other regulated investment companies, or real estate investment trusts.

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