A lump-sum distribution occurs when, in one tax year, you receive the total balance from the pension or profit-sharing plan of an employer due to termination of employment, termination of the plan, or death of the employee.
Iowa lump-sum tax applies only if IRS form 4972 was used to compute the federal tax on any portion of the lump-sum distribution. If there is no federal lump-sum tax, then there is no Iowa lump-sum tax.
Enter 25% of the federal tax from IRS form 4972 on line 40 of the IA 1040. Include federal form 4972.
If a lump-sum distribution reported on federal form 4972 was received while an Iowa resident, 25% of the federal tax from form 4972 must be entered on line 40. Part-year residents who receive a lump-sum distribution while not an Iowa resident are not subject to Iowa lump-sum tax on that distribution. A copy of the federal form 4972 must be included.
Nonresidents receiving lump-sum distributions are not subject to Iowa lump-sum tax.
Married Separate Filers (including status 4):
Lump-sum tax is reported by the spouse who received the distribution.