I received a lump-sum distribution from a retirement account, but no taxes were withheld. How do I determine whether estimated taxes should be paid?
You should get Form 1040ES, Estimated Tax for Individuals, to help you figure your estimated tax liability. Since this situation involves a lump-sum distribution, you may qualify for the five-year or ten-year tax option. Lump-sum distributions must meet specific requirements to qualify for optional tax treatment. The election to use either option can be made only once after 1986 by a participant born before 1936. However, beginning in 1995, a participant born after 1935, who has reached age 59 1/2 at the time the distribution is made, may be able to use the 5-year tax option. Thus, you may also need Form 4972, Tax on Lump-Sum Distributions, to make an accurate estimate of your income tax liability.
