Tax consequences of lump sum

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Q. My husband retired from 36 years of federal service on June 2.  He is in CSRS. We hope he will begin receiving his check within a month or two. Given that he retired halfway through the year, and given that his initial checks will be only 60 percent to 70 percent of what is due, we anticipate that he could get the money owed for those first months in a lump sum in the next tax year. This could be a sizable sum and could have significant tax consequences. It also makes it hard to plan for the correct amount of withholding for this year.  I was told that there is a rule that when he gets that lump sum, if it is over $5,000, he can put it in his Thrift Savings Plan account. Is that correct? If so, what paperwork do we need to file?

A. I know of no such rule. Annuity income is not eligible to be deferred into the TSP.

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  1. Could the questioner be mistaking this for the ability to transfer a Voluntary Contribution Plan amount directly into a Roth IRA upon retirment? Note: No immediate tax advantage as the VCP amounts are already taxed.

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