Q. I’ve heard there is some sort of tax break (deduction/credit?) that may be claimed if you earned less in your first year of CSRS retirement than you earned while working. Is this true? Local tax filers are unfamiliar with this, but then there are few federal retirees in my area. How do you claim this? Any specific tax form, etc., to use? I retired in June 2011. Would I claim it on 2011 tax year (half-year retired) or 2012 (first full year in retirement)? A. While there is no such tax break for either CSRS or FERS employees, there…
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Q. I am 60 years old and had emergency major open heart surgery May 16, 2011. The Mayo Clinic in Jacksonville, Fla., installed a left ventricular assist device. I had to stay away from my home in Georgia and stay close to the Mayo Clinic following this procedure for several months, which put a strain on my savings. I was forced to have to retire with approximately 37 years of government service. My retirement date was Sept. 2, 2011. I put in for an alternate retirement annuity because of my qualifying medical condition to help me pay my medical bills…
Q. Are survivor annuities paid to surviving spouse taxable? Distribution code on 1099-R is 4-Death Benefit and no federal income taxes were withheld. A. Yes, they are. However, if there are any unexpended retirement contributions in the late spouse’s account, a portion of the annuity would be tax-free. For more information, go to https://www.irs.gov/publications/p721/index.html.
Q. If I set up a payroll deduction to pay my military deposit, are the payments pretax items on my leave and earnings statement, like with the Thrift Savings Plan, or do they get taxed like other earnings? If I make the payment with a lump sum, is there a way to deduct that on my taxes? If so, what do I need to do? I am a current FERS employee. I am at the point of paying back my military deposit for my six years active duty. I will either pay a lump sum by check or set up…
Q. A CSRS annuitant friend of mine would like to apply for a temporary summer position that will be open in our agency for which he is fully qualified. Would she be eligible without losing part of his annuity? I believe the position will be Social Security taxed only, not a FERS job. A. As a rule, returning to work for the government will result in the employee’s salary being offset by the amount of his annuity. The only way to find out if there might be an exception in this case would be for him to talk with an agency benefits…
Q. I plan on retiring in August and have a question about federal and state tax. Is the annuity taxed before the spousal is taken out? Or is the spousal taken out, then whatever is left is taxed? A. I assume that you are asking about the tax consequences of electing a survivor annuity for your spouse. The reduction in your own annuity occurs when it is adjudicated by the Office of Personnel Management. Therefore, the starting point for federal taxation is the annuity you receive, not the one you would have received if you hadn’t elected a survivor annuity. However,…
Q. I left the federal service 15 years ago, so I am a discontinued service employee with FERS and Thrift Savings Plan retirement accounts. I am 65 years old and have not started to take my FERS annuity payments, which should have started at age 62. Since I am making a reasonably good income outside of the federal government at the moment, I decided to hold off starting my FERS annuity payments until I actually retire — which may be in several more years, so I will be in a lower tax bracket. Is this a mistake? Are my assumptions correct in that whenever I…
Q. I have 37 years civil service with the government (CSRS) and plan to retire either Dec. 31, 2012, or Jan. 1, 2013. If I do not use any of my use-or-lose leave and I retire Jan. 1, 2013 will I get paid for the use-or-lose leave for 2012 and 2013 in one lump sum? How is this sum taxed? A. Lump-sum payments for unused annual leave are taxed as earned income. FYI: The 2012 leave year ends Jan. 12, 2013. If you retire Dec. 31, 2012 (a Monday), or Jan. 1, 2013 (a Tuesday), you wouldn’t be retiring at the…
Q. I am a Civil Service Retirement System federal employee who is considering taking the Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay offered if I am approved. Are you taxed at a higher percentage rate on the $25,000 than you are taxed on your regular salary? According to the tax bracket table, my salary is taxed at 25 percent or 28 percent. A. Buyout incentives are taxed as ordinary income, just like your wages.
Q: I have heard that the new health care law requires all federal employees to pay income tax on the government-paid portion of our heath care plan’s cost. Is this true? A: No, it isn’t true. What is true is that in 2018, a 40 percent tax will be levied on health insurance plans that cost more than $10,200 per individual or $27,500 per family. The tax will be on any coverage that exceeds the limit. Those figures will be based on the combined contributions of enrollees and the government, and the expense will likely be passed on to consumers.…