Q. I was injured on the job while working for the federal government and spent 26 years as an annuitant under the Office of Workers’ Compensation Programs. Recently, I was terminated from OWCP as being recovered from my work-related injury and retired under CSRS as a disability retiree. When I received my first retirement check, I noticed that federal taxes had been deducted. Is this correct? I had thought that disability retirement annuities were not taxable. Will these tax deductions end at some time in the future, perhaps at my minimum retirement age? I will be 68 years old in August.
A. If you’ve been paying federal income tax, you had to know two things: what your contributions were to the retirement fund and what portion of that amount was nontaxable. The first piece of information should be on the 1099-R you receive every year from the Office of Personnel Management. You can find the amount that is tax-free every year by doing the arithmetic found in Internal Revenue Service Publication 721.
If there are any undisbursed contributions left in the fund when you die, they would be distributed according to the standard order of precedence.