Q: I am CSRS and my plans are to retire Jan. 1. 2012. I was told that the last day for use/lose is Dec. 31, 2011, so that is the day I will have to retire. I cannot retire on Jan. 1, 2012, or I will use my use-or-lose leave. When I file taxes, will it show me receiving an additional amount of money (approximately $10,000) for the year 2011 (which will put me into a higher tax bracket), or will it show as income for 2012?
A: Your lump-sum payment for unused annual leave will be taxable in the year it is received.