IRS Posts Form 4972, Used to Claim Special Tax Treatment for Employer Plan Distributions for 2022

The IRS has posted Form 4972, Tax on Lump-Sum Distributions, for tax year 2022. The form is used to take advantage of special grandfathered taxation options for certain individuals who were born on or before January 1, 1936. Those who qualify and who have taken a lump sum distribution during the tax year may be eligible to satisfy their income tax obligation on such amounts using a favorable 10-year averaging formula, a capital gains rate of 20 percent, or both. A lump sum is generally defined as a taxpayer's receipt of all assets from all of an employer's retirement plans of one type within a tax year. IRS examples of "type" include pension, profit sharing, or stock bonus plans. Beneficiaries of such accounts are generally eligible for the favorable tax treatments, too, if the original account owner was born on or before January 1, 1936. Certain distributions identified in the form's instructions do not qualify for these special tax treatments.