Retirees in the United States, in certain circumstances, can choose to withdraw their retirement plan money either within a certain period or the whole sum at once. The second option is called a lump-sum distribution. This term applies not only to pensions but to other spheres of economics in general.
Regardless of how a person wants their pension to be distributed, they normally have to pay certain taxes for it. If a retiree needs to take all the money from their retirement account as a lump-sum payment, they might have to pay a significant tax because the total amount is probably large. IRS Form 4972 lets taxpayers lessen their fiscal burden.
The US Internal Revenue Service (or IRS) strictly limits payers’ categories who can send this form. It provides a list of requirements you have to meet to submit the document.
For instance, pensioners themselves cannot use the template if their birthdate is later than January 2 of 1936. It narrows down the circle of people who can use the template to a tiny number. Besides retirees, the form is used by the relatives and representatives of those who passed away.
You can check the Service’s guides to see if you are qualified in advance. However, below, you will find out step-by-step guidelines on the form creation; from there, you will find out that the template’s first part offers you a set of questions to determine if you can or cannot use the document.
If you have already submitted the form at least once after 1986, you cannot file it anymore. Thereby, if you have not filed it in the named terms, you can send it now, but only once.
You will probably not require any help when completing the form; however, it is always a bright idea to consult with experts if you have any questions. The form consists of one page to fill out and a couple of pages where you will find all the needed guidelines. You can add some numbers to the second page, but keep it in your archive and do not file it anywhere.
All in all, the form has three parts, and you have to see the Service’s guide and know certain details about your plan to define which parts you should complete. So, it is crucial that you read the governmental instructions before you work on your document.
Anytime you need to create a legal document in the United States, it is necessary to have a template you can use as a sample to create your own from or fill it out with your data and make it a full-fledged document. We offer our advanced form-building software to get a convenient file with IRS Form 4972 that you can fill out. Another way to get the form is to go to the Service’s official site, but you may spend some time searching for the document there.
When the download is complete, open the file and read our general instructions below. If you lack information, you may always turn to the Service’s guide provided on the form’s second, third, and fourth pages. If neither our manual nor the official guide satisfies your needs and answers your questions, use the help of professionals to prevent making mistakes in your template and facing penalties in the future.
1. Introduce Yourself
You, as a taxpayer, must tell who you are so the Service can identify you when it receives your document. This form does not require much data because it goes together with your tax return. So, you should only insert your name (it should be the same as in your return) and your identifying number on the top of the form’s first page.
2. Answer a Set of Questions
You will see a set of questions added here to define whether you can or cannot submit this document. It will help you understand right away if you should or should not keep completing the template.
Near every question, you will see the answer’s definition. For example, if you reply “no” to the first question, you do not need to use this document. Answer each question step by step by marking the relevant “yes” or “no” box on the right. Then, check all your answers to determine whether you are qualified for this document or not.
3. Complete Part II (If Applicable)
Your distribution might presume a capital gain amount, and if this is your case, you may select this method by completing the form’s second part. Insert the required number from the 1099-R Form in line 6; then, multiply it by 20% and insert the result in the following line.
4. Fill Out Part III (If Applicable)
If you have followed our recommendations and read the Service’s info on the form, you already know that you can use both parts of the form. If needed, complete the third part: enter all the numbers and make calculations the way described in the template.
In the form’s last line (30), you will define your total tax on the lump-sum distribution. After you have gotten the result, do not forget to insert it in your tax return as well.
5. Provide Data to Worksheets (Page 3)
On the form’s Page 3, you will see a couple of worksheets you will later store in your archive. You will need your Form 1099-R and a calculator to count all the numbers. Enter the results in the designated line and keep this page for yourself.
The answer is simple: you must add the document to your tax return. The whole document package must be delivered to the Service in terms it has set (in 2021, you have to submit them before April 15). You can either use online resources or visit a post office in your area to send your papers.
