Browsing: taxes

Q: In a recent response you said, “Your income will be taxed in the year in which it is constructively received.” What does that mean? If I retire on Dec. 31, 2010, and receive my last paycheck in January, which will include my lump-sum payment for terminal annual leave, isn’t that money taxed as income received in 2011? Will it not be shown as income on the W-2 for 2011, not 2010? A: It is not unusual for an employer to include income on the W-2 or 1099 for the year in which it was paid, even though the income…

Q: This is regarding the following question and answer — Q. If I have a traditional IRA worth $100,000 with a basis (post-tax contributions) of $20,000; can I roll over $80,000 to the Thrift Savings Plan and the other convert the other $20,000 to a Roth? Would these two actions result in a tax-free transaction? A. Yes, a special rule allows for this to be done. — is this your final answer? Please tell us what the special rule is. And if this is the final answer, can a retiree do this? I would contribute my pre-tax earnings in my…

Q: I retired with a Federal Employees Retirement System Thrift Savings Plan account and am 60 years old. I would like to make a partial withdrawal and understand it will be taxed 20 percent by the federal government. At the end of the year, they will send a 1099 form to be used for federal income filing. I still have two children in college and am currently paying for that. Will I be able to recoup some of the income tax paid from my withdrawal if all works out on my federal tax form (education credits)? Or is this tax…

Q: I’ve recently received a civil service deposit account statement and have two questions regarding payment. I am planning on rolling over an IRA account for payment. My first question: Can you confirm that there are no tax penalties for rolling over an IRA to the Civil Service Retirement System (Redeposit)? These are the instructions I am planning on giving my IRA company: Make check payable to Office of Personnel Management. Indicate FBO [my name] and include the claim number in the memo. My second question: Do you expect that this will cause any delays in processing my payments?  If…

Q: I am just about to retire from the FBI, where I’ve worked for 30 years. My parents left me a stock portfolio which dates back several decades. I would like, after retiring, to find and purchase a home using the stock portfolio, which is held in a trust my parents set up for me. I have never purchased a house, and I am wondering if there is any way to get around the capital gains taxes that probably would eat up huge chunks of the value of the stock portfolio once I liquidate most of the stocks to purchase…

Q: I turned 55 this year and just applied for disability retirement under the Federal Employees Retirement System. I have large bills I want to pay off. My income will drop the first year, then will decrease $1,000 the following year before continuing at that rate. I realize if I keep my Thrift Savings Plan or roll it over once I leave service, I will not be able too take a loan on it. I realize I will need to pay my fair share of taxes, but is there a way I can work it out that I can take…

Q: I am a federal firefighter with a mandatory retirement at age 57. I plan to retire soon and I plan to completely withdraw all of my Thrift Savings Plan funds and move to a South America with a full withdraw option in one payment. How much of a tax hit can I expect to take by doing this, and is this taxed as ordinary income, as well, for the year? A: Your withdrawal will not be subject to the early withdrawal penalty, but will be subject to mandatory 20% tax withholding. Funds withdrawn from the TSP are considered ordinary…

Q: I am 56 years old and have 33 years of combined federal service (20 years in the military and 13 years as a civilian), and due to personal reasons, I chose to retire on March 26, 2010. Approximately 14 months ago, I borrowed $50,000 from my Thrift Savings Plan account. I managed to repay approximately $10,000 of the loan prior to retirement, so I still owe approximately $40,000. Can you tell me approximately how much I will have to pay in taxes and the early distribution penalty? The reason I am asking is because I am in a position…

Q: I was told that if you withdraw money from your Thrift Savings Plan account, you are subject to a 20 percent fee and then also subject to pay taxes on the money as income at the end of the year. A: There is no fee to withdraw from your TSP account. Under certain circumstances, there will be a tax deposit withheld from your withdrawn amount, which will be credited against your tax bill for the year.

Q: I had to retire from federal service because of medical reasons, and I was granted the medical retirement in 2009. I had to withdraw all my TSP  funds in order to survive. I was 57 years old and I had 20 years of time, however, I did buy back three years so it should have been considered 23 years of federal service employment. Can someone tell me what to expect with my 2009 income taxes, such as penalties and taxes? A: Your federal service record has no impact on the taxation or penalties imposed on TSP withdrawals. The money you have withdrawn…

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