Form 4972 Tax on Lump-Sum Distributions

Purpose of Form

Use Form 4972 to figure the tax on a qualified lump-sum distribution (defined below) you received in 2020 using the 20% capital gain election, the 10-year tax option, or both.  These are special formulas used to figure a separate tax on the distribution that may result in a smaller tax than if you reported the taxable amount of the distribution as ordinary income.  You pay the tax only once, for the year you receive the distribution, not over the next 10 years. The separate tax is added to the regular tax figured on your other income

What Is a Qualified Lump-Sum Distribution?

It is the 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 (for example, pension, profit-sharing, or stock bonus plans) in which the participant had funds. The participant’s entire balance doesn’t include deductible voluntary employee contributions or certain forfeited amounts. The participant must have been born before January 2, 1936.