If a Kansas resident receives a lump-sum distribution and elects the special federal tax treatment available to individuals born before January 2, 1936, part of that distribution may qualify for a Kansas subtraction modification.
When a taxpayer files federal Form 4972, Tax on Lump-Sum Distributions, Kansas allows a subtraction adjustment to help prevent a portion of the distribution from being taxed twice for Kansas purposes. The adjustment is reported on Kansas Schedule S.
Who Qualifies?
A taxpayer may qualify if they:
- Are a Kansas resident.
- Received a qualifying lump-sum distribution.
- Elected the special federal lump-sum distribution tax treatment on Form 4972.
- Were born before January 2, 1936, and meet the federal eligibility requirements for Form 4972.
Kansas Subtraction Amount
For qualifying taxpayers, enter a subtraction equal to 13% of the qualifying lump-sum distribution shown on Form 4972. The remaining portion of the distribution continues to be taxed under Kansas income tax rules.
How to Enter the Adjustment in the Return
To make the Kansas lump-sum distribution entry:
- Select State.
- Edit the Kansas return using the three dots.
- Select Tax.
- Choose the box labeled KS Tax on Lump Sum Distributions.
- Enter the qualifying amount from Form 4972.
Additional Information
The Kansas instructions explain that residents who are subject to federal tax on a lump-sum distribution under IRC Section 402(e) are also subject to Kansas tax on the distribution. The Kansas return includes a separate calculation for lump-sum distributions on Form K-40, Line 11.
For complete guidance, see Kansas State Instructions