Q. I am a FERS employee with DoD. I plan to retire in December 2016 at age 61. At that time I will have 35 years of service. I will be 62 in February of 2017. My high three will be about $124,000. I am trying to estimate my take-home pay from Social Security and FERS. My FERS annuity will be about $49,000 per year. My Social Security will be about $22,000 per year. Do I have to pay federal taxes on FERS and Social Security, and state taxes (Michigan)? Social Security on the FERS annuity? Medicare on Social Security…
Browsing: taxes
Q: Illinois does not tax federal pension benefits. What other states having an income tax also do not tax federal pensions? A: Alabama, Michigan, Pennsylvania, Hawaii, Massachusetts, Kansas, Mississippi, Louisiana and New York. In Kentucky, the total amount is exempt only if the individual retired before Jan. 1, 1998. In North Carolina, annuities aren’t taxed beginning in 1998, but only if the individual had five years of creditable service as of Aug. 12, 1989. In Oregon, annuities aren’t taxed for those who retired before Oct. 1, 1991; those who retired on or after Oct. 1, 1991, are taxed only on…
Q: My federal income tax withheld for February 2011 increased by $45.28. It increased from $349.80 to $395.08. I did not request this change. Is there reason for this retiree federal income increase? I understand that I am not the only retiree affected by this change. A: According to NARFE, the National Association of Active and Retired Federal Employees, “While all of the attention recently was on Congress extending the Bush-era tax cuts — which happened — a lesser-known federal tax credit for employees and retirees that was part of the 2009 Stimulus law was allowed to expire. “The ‘Making…
Q: My understanding is that when Social Security was created in 1935 the federal government did not include federal employees as participates in the Social Security system. The decision was based on the fact the federal government already had such a system for its employees (that was more generous). States, cities, counties, etc., were given the option of participating. But if they had an existing system they were not allowed to participate. Thus, a segment of the federal government’s “Civil Service Retirement System” (CSRS) is essentially a Social Security-like segment. Many states now exempt social security from state income tax while fully taxing…
Q: Articles in Federal Times mentioned that CSRS employees will not receive the payroll tax deduction, but they have not mentioned CSRS Offset employees. As CSRS Offset employees pay into Social Security, will they receive the payroll tax deduction in 2011? A: Yes, CSRS Offset employees will receive the Social Security payroll tax deduction with no increase in the amount they contribute to CSRS.
Q: Are Social Security and Medicare taxes withheld from Federal Employees Retirement System annuity and supplement checks for retired law enforcement officers? A: No, they are not.
Q: A friend told me that her monthly Social Security benefit was reduced by $250 because of the profits made from the sale of a house that she inherited from her mother. Can this be true? A: The Social Security earnings limit only applies to earnings from wages or self-employment, and then only for those individuals who haven’t reached full retirement age. In the ordinary course of events, income received through the sale of a home wouldn’t be considered to be earnings. However, if she reported any portion of the proceeds as earnings on her federal income tax return (because…
Q: My husband recently turned 62 and applied for Social Security benefits. He is a previous Civil Service Retirement System employee, so we know that his Social Security benefit will be reduced. The problem is that he was previously married and must pay his ex-spouse a large portion of his CSRS retirement. Yet when his retirement income from CSRS was taken into account in order to offset his benefits, the Social Security Administration used his gross benefit amount and did not subtract the annuity for his former spouse. This reduced his benefits by a large portion. Why is it that…
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.…
Q: I am need to clarify whether disability retirement becomes nontaxable once a person reaches retirement age. I cannot get a clear answer from the Office of Personnel Management or the Internal Revenue Service. I have gone over IRS Publications 721 and 525. My father left the Post Office on disability in 1972. He is now 78 years old, and I am trying to file his tax returns. He is not eligible for Social Security. A: There isn’t a tax break for a federal disability retiree unless he is totally disabled for all gainful employment. The retiree’s age has no…