Q. I retired under CSRS effective Sept. 1, 2011. I thought that my annual annuity would be exempt from federal taxes until those monies I had contributed over those many years of service were exhausted. I am referring to dollars contributed to my retirement account far in excess of $100,000. I have filed two years of taxes using TurboTax software, and it seems that most, if not all, of my retirement annuity is being taxed without any exemption for my retirement contributions. Am I simply misinformed that I ought to be receiving a federal tax exemption until such time as my contribution has been exhausted?
A. Boy, are you behind the times! The law that allowed retirees to receive their contributions first died when the law was changed in 1986. Since then, retirees have received a portion of those contributions, which are nontaxable, along with the government’s share, which is. For more information about how the proportions are determined, go to www.irs.com and download a copy of their Publication 721.
