I took my retirement when I quit my job it was for 12,384.00 I paid federal taxes of 2,500.. But none on state. I should have filed this last year but received this late so now I received a letter from the IRS saying I owe them 2,500. Should I pay them and not file this form this year. Or can I file this form this year because I did pay 2,500 in federal.

You need to file the return for last year when you respond to the IRS letter. That may reduce what you actually owe.

You CANNOT claim the income the year after you actually got the money.