Ten-Year Tax Option for Lump-Sum Distributions

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The 10-year tax option is a special formula used to figure a separate tax on the ordinary income part of a lump-sum distribution from a qualified retirement plan. You pay the tax only once, for the year in which you receive the distribution, not over the next 10 years. You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. Form 4972 (PDF) is used to compute the tax on a lump-sum distribution using the 10-year tax option. Its instructions contain detailed information. For more information about lump-sum distributions, refer to Lump-Sum Distributions. Additional material can be found in Publication 575, Pension and Annuity Income.

Source: IRS.gov

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