TSP withdrawal


Q: I have a question regarding a withdrawal recently made from my TSP account. I wanted to make an investment with this account and withdraw the full amount by not having the taxes withheld on the account. When I called the TSP phone number, the representative said that I could withdraw the funds and pay the taxes later on my next tax return by using a WP4 form. Being assured that it could be done, I went ahead and sent in the form to withdraw from my TSP account with the WP4 form. Without informing me first, the money was withdrawn from the account with the 20 percent tax withheld and I could no longer make my investment. It was when I called to inquire on the status of the account that I found this out. The representative I talked to said that the funds could not be re-established into my TSP account, but did say they have a record of the other representative who said that I could delay the withholding tax. I would like the funds returned to my account. Do I have any recourse in this matter? Would it benefit me to work with an attorney?

A: The relevant material available on the TSP website clearly explains that the 20 percent mandatory withholding on a lump-sum, full withdrawal from an account following separation from service may not be waived or reduced. It may only be increased using form WP4. I’m not sure whether an attorney would help, but I doubt that it would. Your experience provides a valuable lesson for others: It is better to obtain reliable counsel – in this case, engaging a CPA would have been a good idea – before acting, than after.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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