Q. I was offered VERA at office. I would like to accept, but have a TSP loan balance for a home loan that won’t get paid by the 90-day deadline. My retirement is set for July 2020. When I separate and still have outstanding balance, how will I get taxed and at what percentage rate? I was not due to retire until May 2027. Also, will it affect annuity payments, and how long do I have to pay the loan back? A. Any unpaid balance will be declared a taxable distribution and added to your tax return for that year as ordinary income. The tax…
Browsing: Tax
Q. Which would be more advantageous to reduce my annual federal tax bill: contribute more into TSP or withhold more and have more from my salary go toward federal taxes? Am I correct that contributing more into TSP would go toward retirement savings, reduce my taxable income and lower my federal tax bill? A. It’s impossible to say which will be “best.” One is prepaying your federal taxes, and the other is deferring income tax from the current year into a future year. If you can do both, do both. If you can only do one or other, then pay…
Q. When I retire, if I use the funds from my Roth TSP to buy an annuity, are the monthly proceeds tax free? A. If Roth funds are used to buy a life annuity, and the annuity is designated a Roth IRA annuity, the payments will be tax free.
Q. I am a 51-year-old retired federal employee with 27 years of service. I retired on 12/31/18. I served 25 years in a covered federal law enforcement officer position, then transferred to a non-covered LEO position with another agency for the remaining two years. I do receive the LEO FERS retirement. My issue is with the TSP withdrawal options. According to the Defending Public Safety Employees Retirement Act, effective 01/01/16, any federal public safety official, such as LEO, who separate from service at age 50 or older could make penalty-free TSP withdrawals if they retire after 12/31/15. In order for…
Q. I retired from my dual-status job on Dec. 31, 2018, at the age of 53 in Mississippi, which is below my minimum retirement age. Am I able to collect from my TSP plan without paying a penalty since I am under my MRA? What are the laws that govern this for my CPA to use at tax time? A. If you receive a TSP distribution before you reach age 59 ½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10 percent of any taxable portion of the distribution not…
Q. I plan on retiring September 2020 with over 41 years of service. What states don’t tax a U.S. Postal Service pension, if any, or what states tax the least? A. Take a look at Alabama, Alaska, Florida, Hawaii, Illinois, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington and Wyoming.
Q. I am 60. I retired from the Federal Aviation Administration (air traffic controller) at 56. At that time, I set up the “Substantially Equal Payments” under the 72 t. That arrangement ends this September (5 years). In 2015, Congress passed the “Defending Public Safety Employees’ Retirement Act.” Will this allow me to take a disbursement in addition to my ongoing “Substantially Equal Payments” without the additional 10 percent tax? My financial adviser believes that by taking other disbursements, even given the 72 t (10), will trigger the penalty because it would make the “Substantially Equal Payments” different. A. Generally,…
Q. I am a FERS employee age 47 with 27 years of service. I am currently on FMLA and will be resigning and applying for medical disability retirement. I know I can withdraw from my TSP but am not clear on the annuity option tax penalty. I want to withdraw funds to sustain me while waiting for a decision on my disability retirement. A. If you receive a TSP distribution before you reach age 59 ½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10 percent of any taxable…
Q. I retired from the federal government (Department of Veterans Affairs) on Jan 31, 2018. I did 32 years and retired at 56. I withdraw all my TSP funds and, of course, federal tax was taken out. When I file my 2018 taxes, do I pay the NYS/city taxes? I don’t have enough to itemize.
Q. I am currently employed as a full-time career Senior Executive with 24 years of service and two years additional military service. In December 2018, I turned 70 years old; I’ll reach the 70 ½ mark in three months, in June 2019. According to the TSP document “Withdrawing Your TSP Account After Leaving Federal Service” {p 3, Limitations on Leaving your money in the TSP}, I don’t have to withdraw funds until April 1 of the year following the year I retire. However, I will be subject to the RMD because of my age. Because of the tax implications, I plan to…