Q. I retired under CSRS in Washington state in 2011. Washington has no state income tax. If I decide to move to another state that does have state income tax, will my annuity be taxed by that state? What if I decide to become an expat and live in Mexico? Can I do that without affecting my pension? Do I have to have a U.S. mailing address? A. If you move to another state, the taxability of your annuity will be determined by the laws of that state. If you moved to another country, some of your annuity might be taxable under its…
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Q. I bought back 2½ years of service (about $2,500; $647 was principle and $ 1,857 was accrued interest) in 2011. The redeposit was for service provided from March 25, 1985, to Aug. 26, 1987. Is any of it is tax-deductible for this year’s taxes? A. No, it isn’t.
Q. I am in CSRS Offset. If I wait until 66 to retire from the government (with 32 years as a fed), will I still have a reduction in my government retirement and a reduction in Social Security at that time? I am 60 now with 27 years government service, and I have approximately 22 years of Social Security time now. A. The annuities of all CSRS Offset employees are reduced by the amount of Social Security benefit they earned while covered by CSRS Offset. The amount you receive should be the same. It will just come from two different sources,…
Q. I am a retired Postal Service employee. My accountant has informed me that if I am able to pay my annual health insurance premiums in a lump sum, I can deduct it from my taxes. Does the Office of Personnel Management allow me to do this? A. No.
Q: I plan to retire this year. I am under CSRS. I understand the WEP for me but have some doubts about the Social Security benefits of my wife. She has been paying Social Security all her life and never worked for a government with another type of pension. Is her Social Security retirement affected because of me? If I choose a survivor benefit, how is that going to affect her Social Security? A: The fact that you will receive a benefit from a retirement system where you didn’t pay Social Security taxes will have no affect on her own…
Q: At the start of 2011, my taxes for my FERS retirement went up about $100. Imagine my surprise. It was right after reinstituting the Bush tax cuts. Why? A: The Making Work Pay tax credit expired Dec. 31, 2010. As a result, many retirees saw an increase in the amount of federal tax being withheld from their monthly annuity payments. The tax withholding tables published by the IRS were adjusted to provide for the correct withholding amounts without this credit.
Q: I live in Pennsylvania and I am interested in knowing the state and federal tax rate that will be applied to my federal pension from the U.S. Post Office. A: To find out how your retirement annuity will be taxed by the federal government, read IRS publication 721, Tax Guide to U.S. Civil Service Retirement Benefits, available at www.irs.gov/pub/irs-pdf/p721.pdf. To find out how Pennsylvania will tax those benefits, call or visit your state office of taxation.
Q: I am a federal retiree receiving an annuity of $1,344 per month. My husband receives Social Security of $1,810 per month. How much Social Security would I receive upon his death based on these figures? I am aware of the government offset provision. I figured I would receive about $905 per month. $1,344 – 2/3rds = about $877. Subtracting $877 from $1,810 leaves about $905. Am I on the right track? Whenever I called Social Security (when you can get someone on the phone) I keep getting conflicting answers. A: You are on the right track. Because you are…
Q: I am 65 with a birthday in July. I plan on retiring next year (FERS), and am considering submitting for my Social Security benefits back to my 66th birthday, in December 2011. I believe that means I will collect my four months of previously earned checks next year, thereby pushing my tax liability for that money into 2012. Am I misreading the Social Security website (it says six months max back payment), or is this possible? A: What you read on the Social Security Administration website is correct. However, while you are reviewing the tax implications of applying for…
Q. I am 56 years old with almost 35 years service. I am thinking about retiring in a few months. Is the federal income tax withheld, (in retirement) the same percentage taken out while working? I’m just working with some figures, so I’ll know how much my monthly check will be. What is the percentage in retirement? A. According to OPM, “Generally, unless you specify a monthly withholding rate or amount, we withhold Federal income tax as if you are married and claiming three allowances. Use Service Online to start, change, or stop the Federal tax withheld from your annuity…