Kentucky 4972-K

Kentucky Form 4972-K is a tax form used by individuals to calculate the state tax on lump-sum distributions received from qualified retirement plans. This form applies specifically to individuals born before January 2, 1936, who qualify to file federal Form 4972. Lump-sum distributions are typically payouts from retirement plans, pensions, or other qualified accounts. The form allows individuals to calculate how much of the lump-sum distribution is taxable, taking into account exclusions and reductions allowed by Kentucky law.

If you’re filing Kentucky Form 4972-K, you are likely dealing with a one-time distribution from a retirement account and want to ensure you calculate your Kentucky taxes properly. This form must be attached to your Kentucky state tax return (Form 740, Form 740-NP, or Form 741). If you don’t qualify to file federal Form 4972, you cannot file Form 4972-K. Let’s go step by step through the filing and completion process.

How To File Kentucky Form 4972-K

Filing Kentucky Form 4972-K is straightforward if you meet the qualifications. You must:

1. Be eligible to file federal Form 4972 (this typically applies to lump-sum distributions from retirement accounts).
2. Attach Form 4972-K to your Kentucky individual income tax return (Form 740, 740-NP, or 741).
3. Follow the instructions below to complete it accurately.

Now, let’s break down the form line by line.

How To Complete Kentucky Form 4972-K: Line-By-Line Instructions

The form is divided into four parts. Each section serves a specific purpose in calculating your Kentucky taxable amount and the associated tax. Below, we’ll go through each line.

PART I – Qualifications

1. Are You Filing Federal Form 4972?
   • Mark “Yes” if you are filing federal Form 4972.
   • If “Yes,” you qualify to file Form 4972-K.
   • If “No,” you cannot complete the rest of this form, and you should refer to Schedule M, line 9 (or Form 740-NP, page 4, line 10(b)).

PART II – Excludable Lump-Sum Income

This section calculates the portion of your lump-sum distribution that is excluded from Kentucky taxable income.

2. Enter the Amount From Schedule P, Line 3
   • Find this amount on your completed Schedule P and enter it here.
3. Subtract Line 2 From $31,110
   • Subtract the amount on line 2 from $31,110. Enter the result.
4. Enter the Amount From Line 8(a) Plus Line 9
   • Add the amounts on lines 8(a) and 9 from this form and enter the total here.
5. Enter the Lesser of Line 3 or Line 4
   • Compare the amounts from lines 3 and 4. Enter the smaller of the two.
6. Amount of Line 5 to Be Applied to Capital Gain Distributions
   • Enter the amount from line 5 here. This will also be entered on line 8(b).
7. Amount of Line 5 to Be Applied to Regular Lump-Sum Distributions
   • Subtract line 6 from line 5. Enter the result here. This amount will also appear on line 12.

PART III – 20% Federal Capital Gain Election

Complete this section only if you chose the 20% election for federal Form 4972.

8. • 8(a): Enter the capital gain part from Box 3 of Form 1099-R.
   • 8(b): Enter the exclusion amount from line 6.
   • 8(c): Subtract line 8(b) from line 8(a). Enter the result here. Include this amount on Schedule M, line 5 (Form 740-NP, page 4, line 16, Column B, or Form 741, Schedule M, line 3).

PART IV – 10-Year Option

This section calculates the Kentucky tax on lump-sum distributions using the 10-year tax averaging method.

9. Ordinary Income From Form 1099-R
   • Enter the amount from Box 2(a) of Form 1099-R, minus Box 3. If you didn’t complete Part III, enter the taxable amount from Box 2(a).
10. Death Benefit Exclusion
    • For beneficiaries of plan participants who died before August 21, 1996, enter the exclusion amount here.
11. Subtract Line 10 From Line 9
    • Subtract the death benefit exclusion from the ordinary income amount to calculate the total federal taxable amount.
12. Enter the Exclusion From Line 7
    • Enter the amount from line 7 here.
13. Subtract Line 12 From Line 11
    • Subtract the exclusion from the total federal taxable amount to get the total Kentucky taxable amount.
14. Current Actuarial Value of Annuity
    • Enter the actuarial value from Box 8 of Form 1099-R, if applicable.
15. Add Lines 13 and 14
    • Add the amounts on lines 13 and 14. If the total is $70,000 or more, skip lines 16–19 and enter this amount on line 20.
16. Multiply Line 15 by 50%
    • Multiply the total on line 15 by 50% (0.50). Enter the result, but do not exceed $10,000.
17. Subtract $20,000 From Line 15
    • Subtract $20,000 from the amount on line 15. If the result is $0 or less, enter zero.
18. Multiply Line 17 by 20%
    • Multiply the amount on line 17 by 20% (0.20) and enter the result.
19. Subtract Line 18 From Line 16
    • Subtract line 18 from line 16 to calculate the minimum distribution allowance.
20. Subtract Line 19 From Line 15
    • Subtract the minimum distribution allowance from the total taxable amount.
21. Federal Estate Tax Attributable to Lump-Sum Distribution
    • Enter the amount of federal estate tax attributable to the lump-sum distribution.
22. Subtract Line 21 From Line 20
    • Subtract the estate tax amount from the adjusted taxable amount.

23–25. If Line 14 Is Blank, Skip These Lines
– These steps calculate the adjusted annuity value and related tax adjustments.

Final Tax Calculation

26. Multiply Line 22 by 10%
    • Multiply the adjusted taxable amount by 10% (0.10).

27–32. Tax on Lump-Sum Distribution
– Follow the steps to calculate the final tax owed based on the adjusted taxable amount. The final tax is entered on line 32 and carried over to your state tax return.