Q: I plan on retiring on Jan. 1, 2011. I am eligible to retire on Oct. 1, 2010. I am a Civil Service Retirement System Offset employee. I will have 30 years, 3 months of civil service and will be 60 years, 3 months of age. I have 240 hours of use-or-lose annual leave, and I will also have gained another 200 hours for the year. If I retire on Jan. 1, 2011, can I receive payment for my unused annual leave? I believe by doing this, I will receive a large lump sum payment and won’t be taxed until 2011.
A: Since Jan. 1, 2011, is the end of the leave year, you would receive a lump sum payment for any and all unused annual leave you had to your credit when you retired. When you receive that payment, all federal and, in some cases, state, taxes will have already been deducted from it. You’ll find out what your tax liability is in 2012 when you file your income tax statement(s) for 2011.