Lump Sum Distributions

What is a Lump Sum Distribution?

A Lump Sum Distribution is the distribution or payment in one tax year of your entire balance from all of your employer's qualified retirement plans of one kind (for example pension, stock bonus or profit sharing plans).

How are lump sum employer's retirement plan distributions taxed?

Generally, payments are taxable in the year you receive them.

How are lump sum distributions from an employer retirement plan reported?

A lump sum distribution is reported on the tax form 1099 R. Some lump sum distributions qualify for special tax treatments.

For example:

Code A in box 7 for Form 1099 R indicates that it is a lump sum distribution and it qualifies for special tax treatments such as the 10 year tax option.

Code G indicates a direct tax free rollover into a traditional IRA.

If:

• you qualify for special tax treatments,
• the distribution is from a qualified plan and
• you were born before January 2, 1936 or
• you are the beneficiary of someone born before January 2, 1936,

you need to complete the tax form 4972, Tax on Lump Sum Distributions.