Browsing: IRS

Q. I’m about to retire at age 47 after 25 years as a federal law enforcement officer. I plan to roll my 401(k) (TSP) over to a traditional IRA and begin taking substantially equal periodic payments per 72(t) from the IRA, which, as I understand, once I start, I have to continue until age 59 ½. I plan to use the annuitization method to make equal monthly withdrawals, but I would like to take the first year’s withdrawal in a lump sum to help pay off some debt. Will the IRS allow that without the 10 percent penalty, or do I have to…

Q. My agency, according to my W-2, overcontributed to my Thrift Savings Plan by $4 on the last pay period of the year. So, with total contributions, I have contributed $17,504 regular contributions and $5,500 in catch-up contributions for a total 2013 amount of $23,004. Is this a problem with the additional $4 being sent to my TSP account? If so, what do I have to do to fix it?  Also, are there IRS penalties I am now responsible for due to my agency’s negligence? A. You may want to make sure that the TSP returns the $4 in overcontribution,…

Q. I retired early with more than 20 years of service due to work-related injuries. I am 50. I have more than $314,000 in my Thrift Savings Plan. I want to withdraw either a partial or full amount but also want to avoid the 10 percent penalty tax. If I transfer my money to an IRA, then make a withdrawal, will I be able to avoid the penalty? What are my options? A. You should consult IRS Publication 590 for the exceptions to the early withdrawal penalty that apply to IRAs. See Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf for…

Q. I am an FERS employee and, for various reasons, have selected Nov. 28, 2015, as my retirement date, age 60+ with 21 years civil service and four years military, for which a deposit has been made. One of the many reasons that I selected this date was so that I could have a Thrift Savings Plan residential loan balance declared as a taxable distribution during the 2015 tax year, because I will have substantial withholdings by that time, and given my tax return history, would have a significant tax overpayment that would be useful in paying a portion of…

Q. I sent TSP Form 77 to the Thrift Savings Plan requesting that funds be withdrawn from my account and sent to a non-TSP IRA. When I returned from overseas, I discovered that a mistake had been made on the forms and instead of all of the requested funds going to the IRA, TSP sent 50 percent of the funds to the IRA and 50 percent to me less a hefty amount to the Internal Revenue Service. I asked for a reversal of the action, but the Federal Retirement Thrift Investment Board turned me down, saying that TSP had not…

Q. I’m 66 and contributed money to a Roth IRA. I would like to withdraw all of it. Do I have any tax consequences? A. Not as long as you’ve had the Roth IRA for at least five years. The rules are a little tricky for figuring this out, so you should consult Internal Revenue Service Publication 590 and/or a tax adviser before proceeding.

Q. My IRA was started when active-duty personnel were permitted to contribute to an IRA with after-tax dollars. I am 66 and want to begin planning for the required minimum distribution with a little long-term projecting. Here is the dilemma. In trying to compute the cost basis and taxable amount, I have to distinguish between the military years “after-tax dollars invested” and the “before-tax dollars investments” contributed during my post-active-duty working years. I found out that for some of the active years, no IRS Form 8506 was filed (showing the contributions for some years). How can I substantiate for the IRS…

Q. I am confused about the five-year rule for Voluntary Contributions Program funds rolled over into a Roth IRA. If a Roth IRA has been funded for five years, is there still a five-year withdrawal waiting period for funds transferred from a VCP account into that IRA? A. The five-year clock applies to each conversion, but how it will affect you isn’t clear from the information you’ve provided. The answer depends upon your age and how much you withdraw. I suggest that you read Internal Revenue Service Publication 590 and consult a CPA before proceeding.

Q. I am 70 years old and have about $100,000 in my Thrift Savings Plan accounts. Can you guide me toward the best options to withdraw the amount? I would prefer to pay the least in taxes to Uncle Sam. A. To minimize the tax burden from required minimum distributions, you should request distributions based on your life expectancy under IRS rules. For the first distribution — the one due for the year you reach age 70½ or retire, whichever comes last) — you should consult a tax adviser to determine whether it is better to take it in that…

Q. I’m separated from federal service due to disability. I’m waiting on a federal disability decision. In 2011, I took money out of my Thrift Savings Plan while still employed due to a decline in pay stemming from my disability, and I knew I would be going out under disability. In 2012, I again took a withdrawal because I did not have any income, was waiting on a decision, and was told that the next withdrawal would deplete the account. Unfortunately, I had to take the last withdrawal this week due to lack of income and no decision on the…

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