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Freetaxes com Index A Assessment of tax, Assessment of tax. Freetaxes com Assistance (see Tax help) B Bankruptcy Code tax compliance, Bankruptcy Code Tax Compliance Requirements Returns due after filing, Tax Returns Due After the Bankruptcy Filing Returns due before chapter 13 filing, Tax Returns Due for Periods Ending Before the Bankruptcy Filing in Chapter 13 Cases Bankruptcy estate, Taxes and the Bankruptcy Estate Attribute carryovers, Carrybacks from the debtor's activities. Freetaxes com Carrybacks, Carrybacks from the debtor's activities. Freetaxes com Disclosure of return information, Disclosure of bankruptcy estate's return information to debtor. Freetaxes com Employer identification number, Employer identification number. Freetaxes com , Employer identification number. Freetaxes com Estimated tax, Estimated tax – Form 1041-ES. Freetaxes com Return filing requirements, Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due Separate taxable entity, Separate taxable entity. Freetaxes com Transfer of assets, Transfer of assets between debtor and bankruptcy estate. Freetaxes com C Conversion or dismissal chapter 11 case, Conversion or dismissal of chapter 11 cases. Freetaxes com Corporations, Corporations Filing requirements, Corporations Tax-free reorganizations, Tax-Free Reorganizations D Debt cancellation, Debt Cancellation Bankruptcy exclusion, Bankruptcy case exclusion. Freetaxes com Corporations, Corporations Insolvency exclusion, Insolvency exclusion. Freetaxes com Partnerships, Partnerships S corporations, S Corporations Deductions and credits, Bankruptcy Estate Deductions and Credits Administrative expenses, Administrative expenses. Freetaxes com Discharge of tax, Discharge of Unpaid Tax Disclosure of return information, Disclosure of debtor's return information to trustee. Freetaxes com , Disclosure of return information to trustee. Freetaxes com Dismissal of case Amended return, Dismissal of bankruptcy case. Freetaxes com E Election to end tax year: Form 1040, Debtor's Election To End Tax Year – Form 1040 Annualizing taxable income, Annualizing taxable income. Freetaxes com Election by spouse, Election by debtor's spouse. Freetaxes com Filing requirements, Making the Election - Filing Requirements Short tax years, Short tax years. Freetaxes com Employment taxes, Employment taxes. Freetaxes com , Employment Taxes Examination of return, Examination of return. Freetaxes com F Free tax services, How To Get Tax Help H Help (see Tax help) I Individuals in Chapter 12 or 13, Individuals in Chapter 12 or 13 Individuals in Chapter 7 or 11, Individuals in Chapter 7 or 11 Gross income chapter 11 case, Income of the estate in individual chapter 11 cases. Freetaxes com Gross income chapter 7 case, Income of the estate in individual chapter 7 cases. Freetaxes com J Jurisdiction over tax matters, Court Jurisdiction Over Tax Matters Bankruptcy Court, Bankruptcy Court Tax Court, Tax Court M More information (see Tax help) O Ordering tax return transcripts, Ordering tax transcripts and copies of returns. Freetaxes com P Partnerships, filing requirements, Partnerships Payment of tax claim, Federal Tax Claims Eighth priority taxes, Unsecured Tax Claims Second, third, fourth priority taxes, Higher priority taxes. Freetaxes com Secured tax claims, Secured tax claims. Freetaxes com Penalties, Penalties. Freetaxes com Relief from penalties, Relief from certain penalties. Freetaxes com Publications (see Tax help) R Request for prompt tax determination, Prompt Determination Requests Request for refund, Requests for refund or credit S Statute of limitations collections, Statute of limitations for collection. Freetaxes com T Tax attributes, Reduction of Tax Attributes Basis reduction, Basis. Freetaxes com , Basis Reduction Carryovers, Attribute carryovers. Freetaxes com Order of reduction, Order of reduction. Freetaxes com Reduction of, Reduction of Tax Attributes Tax help, How To Get Tax Help Tax reporting chapter 11 cases, Tax Reporting – Chapter 11 Cases Employment tax returns, Tax Reporting – Chapter 11 Cases Information returns, Employment taxes and employer's obligation to file Form W-2 in individual chapter 11 cases. Freetaxes com Self-employment taxes, Self-employment taxes in individual chapter 11 cases. Freetaxes com Wage reporting, tax withholding, Employment taxes and employer's obligation to file Form W-2 in individual chapter 11 cases. Freetaxes com Tax return: Form 1041, Figuring tax due. Freetaxes com Figuring tax due, Filing Requirements Payment of tax due, Payment of Tax Due When to file, When to file. Freetaxes com Taxpayer Advocate, Taxpayer Advocate Service. Freetaxes com TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications
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Freetaxes com Publication 721 - Main Content Table of Contents Part I General InformationRefund of Contributions Tax Withholding and Estimated Tax Filing Requirements Part II Rules for RetireesAnnuity starting date. Freetaxes com Gross monthly rate. Freetaxes com Your cost. Freetaxes com Choosing a survivor annuity after retirement. Freetaxes com Canceling a survivor annuity after retirement. Freetaxes com Annuity starting date after 1986. Freetaxes com Annuity starting date before 1987. Freetaxes com Simplified Method General Rule Three-Year Rule Alternative Annuity Option Federal Gift Tax Retirement During the Past Year Reemployment After Retirement Nonresident Aliens Thrift Savings Plan Rollover Rules Distributions Used To Pay Insurance Premiums for Public Safety Officers How To Report Benefits Part III Rules for Disability Retirement and Credit for the Elderly or the DisabledDisability Annuity Other Benefits Credit for the Elderly or the Disabled Part IV Rules for Survivors of Federal EmployeesFERS Death Benefit CSRS or FERS Survivor Annuity Lump-Sum CSRS or FERS Payment Thrift Savings Plan Federal Estate Tax Part V Rules for Survivors of Federal RetireesCSRS or FERS Survivor Annuity Lump-Sum CSRS or FERS Payment Voluntary Contributions Thrift Savings Plan Federal Estate Tax Income Tax Deduction for Estate Tax Paid How To Get Tax HelpLow Income Taxpayer Clinics Part I General Information This part of the publication contains information that can apply to most recipients of civil service retirement benefits. Freetaxes com Refund of Contributions If you leave federal government service or transfer to a job not under the CSRS or FERS and you are not eligible for an immediate annuity, you can choose to receive a refund of the money in your CSRS or FERS retirement account. Freetaxes com The refund will include both regular and voluntary contributions you made to the fund, plus any interest payable. Freetaxes com If the refund includes only your contributions, none of the refund is taxable. Freetaxes com If it includes any interest, the interest is taxable unless you roll it over directly into another qualified plan or a traditional individual retirement arrangement (IRA). Freetaxes com If you do not have the Office of Personnel Management (OPM) transfer the interest to an IRA or other plan in a direct rollover, tax will be withheld at a 20% rate. Freetaxes com See Rollover Rules in Part II for information on how to make a rollover. Freetaxes com Interest is not paid on contributions to the CSRS for service after 1956 unless your service was for more than 1 year but not more than 5 years. Freetaxes com Therefore, many employees who withdraw their contributions under the CSRS do not get interest and do not owe any tax on their refund. Freetaxes com If you do not roll over interest included in your refund, it may qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. Freetaxes com If you separate from service before the calendar year in which you reach age 55, it may be subject to an additional 10% tax on early distributions. Freetaxes com For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575. Freetaxes com A lump-sum distribution is eligible for capital gain treatment or the 10-year tax option only if the plan participant was born before January 2, 1936. Freetaxes com Tax Withholding and Estimated Tax The CSRS or FERS annuity you receive is subject to federal income tax withholding, unless you choose not to have tax withheld. Freetaxes com OPM will tell you how to make the choice. Freetaxes com The choice for no withholding remains in effect until you change it. Freetaxes com These withholding rules also apply to a disability annuity, whether received before or after minimum retirement age. Freetaxes com If you choose not to have tax withheld, or if you do not have enough tax withheld, you may have to make estimated tax payments. Freetaxes com You may owe a penalty if the total of your withheld tax and estimated tax does not cover most of the tax shown on your return. Freetaxes com Generally, you will owe the penalty for 2014 if the additional tax you must pay with your return is $1,000 or more and more than 10% of the tax to be shown on your 2014 return. Freetaxes com For more information, including exceptions to the penalty, see chapter 4 of Publication 505, Tax Withholding and Estimated Tax. Freetaxes com Form CSA 1099R. Freetaxes com   Form CSA 1099R is mailed to you by OPM each year. Freetaxes com It will show any tax you had withheld. Freetaxes com File a copy of Form CSA 1099R with your tax return if any federal income tax was withheld. Freetaxes com    You also can view and download your Form CSA 1099R by visiting the OPM website at  www. Freetaxes com servicesonline. Freetaxes com opm. Freetaxes com gov. Freetaxes com To log in, you will need your retirement CSA claim number and your personal identification number. Freetaxes com Choosing no withholding on payments outside the United States. Freetaxes com   The choice for no withholding generally cannot be made for annuity payments to be delivered outside the United States and its possessions. Freetaxes com   To choose no withholding if you are a U. Freetaxes com S. Freetaxes com citizen or resident alien, you must provide OPM with your home address in the United States or its possessions. Freetaxes com Otherwise, OPM has to withhold tax. Freetaxes com For example, OPM must withhold if you provide a U. Freetaxes com S. Freetaxes com address for a nominee, trustee, or agent (such as a bank) to whom the benefits are to be delivered, but you do not provide your own U. Freetaxes com S. Freetaxes com home address. Freetaxes com   If you do not provide a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to OPM that you are not a U. Freetaxes com S. Freetaxes com citizen, a U. Freetaxes com S. Freetaxes com resident alien, or someone who left the United States to avoid tax. Freetaxes com But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. Freetaxes com For details, see Publication 519, U. Freetaxes com S. Freetaxes com Tax Guide for Aliens. Freetaxes com Withholding certificate. Freetaxes com   If you give OPM a Form W-4P-A, Election of Federal Income Tax Withholding, you can choose not to have tax withheld or you can choose to have tax withheld. Freetaxes com The amount of tax withheld depends on your marital status, the number of withholding allowances, and any additional amount you designate to be withheld. Freetaxes com If you do not make either of these choices, OPM must withhold as if you were married with three withholding allowances. Freetaxes com To change the amount of tax withholding or to stop withholding, call OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D. Freetaxes com C. Freetaxes com calling area must call 202-606-0500). Freetaxes com No special form is needed. Freetaxes com You will need your retirement CSA or CSF claim number, your social security number, and your personal identification number (PIN) when you call. Freetaxes com If you have TTY/TDD equipment, call 1-855–887–4957. Freetaxes com If you need a PIN, call OPM's Retirement Information Office. Freetaxes com You also can change the amount of withholding or stop withholding online by visiting the OPM website at www. Freetaxes com servicesonline. Freetaxes com opm. Freetaxes com gov. Freetaxes com You will need your retirement CSA or CSF claim number and your PIN. Freetaxes com Withholding from certain lump-sum payments. Freetaxes com   If you leave the federal government before becoming eligible to retire and you apply for a refund of your CSRS or FERS contributions, or you die without leaving a survivor eligible for an annuity, you or your beneficiary will receive a distribution of your contributions to the retirement plan plus any interest payable. Freetaxes com Tax will be withheld at a 20% rate on the interest distributed. Freetaxes com However, tax will not be withheld if you have OPM transfer (roll over) the interest directly to your traditional IRA or other qualified plan. Freetaxes com If you have OPM transfer (roll over) the interest directly to a Roth IRA, the entire amount will be taxed in the current year. Freetaxes com Because no income tax will be withheld at the time of the transfer, you may want to increase your withholding or pay estimated taxes. Freetaxes com See Rollover Rules in Part II. Freetaxes com If you receive only your contributions, no tax will be withheld. Freetaxes com Withholding from Thrift Savings Plan payments. Freetaxes com   Generally, a distribution that you receive from the TSP is subject to federal income tax withholding. Freetaxes com The amount withheld is: 20% if the distribution is an eligible rollover distribution, 10% if it is a nonperiodic distribution other than an eligible rollover distribution, or An amount determined as if you were married with three withholding allowances, unless you submit a withholding certificate (Form W-4P), if it is a periodic distribution. Freetaxes com  However, you usually can choose not to have tax withheld from TSP payments other than eligible rollover distributions. Freetaxes com By January 31 after the end of the year in which you receive a distribution, the TSP will issue Form 1099-R showing the total distributions you received in the prior year and the amount of tax withheld. Freetaxes com   For a detailed discussion of withholding on distributions from the TSP, see Important Tax Information About Payments From Your TSP Account, available from your agency personnel office or from the TSP. Freetaxes com The above document is also available in the “Forms & Publications” section of the TSP website at www. Freetaxes com tsp. Freetaxes com gov. Freetaxes com Estimated tax. Freetaxes com   Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax for 2014 (after subtracting your withholding and credits) and you expect your withholding and your credits to be less than the smaller of: 90% of the tax to be shown on your income tax return for 2014, or 100% of the tax shown on your 2013 income tax return (110% of that amount if the adjusted gross income shown on the return was more than $150,000 ($75,000 if your filing status for 2014 will be married filing separately)). Freetaxes com The return must cover all 12 months. Freetaxes com   You do not have to pay estimated tax for 2014 if you were a U. Freetaxes com S. Freetaxes com citizen or resident alien for all of 2013 and you had no tax liability for the full 12-month 2013 tax year. Freetaxes com   Publication 505 contains information that you can use to help you figure your estimated tax payments. Freetaxes com Filing Requirements If your gross income, including the taxable part of your annuity, is less than a certain amount, you generally do not have to file a federal income tax return for that year. Freetaxes com The gross income filing requirements for the tax year are in the instructions to Form 1040, 1040A, or 1040EZ. Freetaxes com Children. Freetaxes com   If you are the surviving spouse of a federal employee or retiree and your monthly annuity check includes a survivor annuity for one or more children, each child's annuity counts as his or her own income (not yours) for federal income tax purposes. Freetaxes com   If your child can be claimed as a dependent, treat the taxable part of his or her annuity as unearned income when applying the filing requirements for dependents. Freetaxes com Form CSF 1099R. Freetaxes com   Form CSF 1099R will be mailed to you by January 31 after the end of each tax year. Freetaxes com It will show the total amount of the annuity you received in the past year. Freetaxes com It also should show, separately, the survivor annuity for a child or children. Freetaxes com Only the part that is each individual's survivor annuity should be shown on that individual's Form 1040 or 1040A. Freetaxes com   If your Form CSF 1099R does not show separately the amount paid to you for a child or children, attach a statement to your return, along with a copy of Form CSF 1099R, explaining why the amount shown on the tax return differs from the amount shown on Form CSF 1099R. Freetaxes com    You also can view and download your Form CSF 1099R by visiting the OPM website at  www. Freetaxes com servicesonline. Freetaxes com opm. Freetaxes com gov. Freetaxes com To log in you will need your retirement CSF claim number and personal identification number. Freetaxes com    You may request a Summary of Payments, showing the amounts paid to you for your child(ren), from OPM by calling OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D. Freetaxes com C. Freetaxes com calling area must call 202-606-0500). Freetaxes com You will need your CSF claim number and your social security number when you call. Freetaxes com Taxable part of annuity. Freetaxes com   To find the taxable part of a retiree's annuity when applying the filing requirements, see the discussion in Part II, Rules for Retirees , or Part III, Rules for Disability Retirement and Credit for the Elderly or the Disabled , whichever applies. Freetaxes com To find the taxable part of each survivor annuity when applying the filing requirements, see the discussion in Part IV, Rules for Survivors of Federal Employees , or Part V, Rules for Survivors of Federal Retirees , whichever applies. Freetaxes com Part II Rules for Retirees This part of the publication is for retirees who retired on nondisability retirement. Freetaxes com If you retired on disability before you reached your minimum retirement age, see Part III, Rules for Disability Retirement and Credit for the Elderly or the Disabled. Freetaxes com However, on the day after you reach your minimum retirement age, use the rules in this section to report your disability retirement and begin recovering your cost. Freetaxes com Annuity statement. Freetaxes com   The statement you received from OPM when your CSRS or FERS annuity was approved shows the commencing date (the annuity starting date), the gross monthly rate of your annuity benefit, and your total contributions to the retirement plan (your cost). Freetaxes com You will use this information to figure the tax-free recovery of your cost. Freetaxes com Annuity starting date. Freetaxes com   If you retire from federal government service on a regular annuity, your annuity starting date is the commencing date on your annuity statement from OPM. Freetaxes com If something delays payment of your annuity, such as a late application for retirement, it does not affect the date your annuity begins to accrue or your annuity starting date. Freetaxes com Gross monthly rate. Freetaxes com   This is the amount you were to get after any adjustment for electing a survivor's annuity or for electing the lump-sum payment under the alternative annuity option (if either applied) but before any deduction for income tax withholding, insurance premiums, etc. Freetaxes com Your cost. Freetaxes com   Your monthly annuity payment contains an amount on which you have previously paid income tax. Freetaxes com This amount represents part of your contributions to the retirement plan. Freetaxes com Even though you did not receive the money that was contributed to the plan, it was included in your gross income for federal income tax purposes in the years it was taken out of your pay. Freetaxes com   The cost of your annuity is the total of your contributions to the retirement plan, as shown on your annuity statement from OPM. Freetaxes com If you elected the alternative annuity option, it includes any deemed deposits and any deemed redeposits that were added to your lump-sum credit. Freetaxes com (See Lump-sum credit under Alternative Annuity Option, later. Freetaxes com )   If you repaid contributions that you had withdrawn from the retirement plan earlier, or if you paid into the plan to receive full credit for service not subject to retirement deductions, the entire repayment, including any interest, is a part of your cost. Freetaxes com You cannot claim an interest deduction for any interest payments. Freetaxes com You cannot treat these payments as voluntary contributions; they are considered regular employee contributions. Freetaxes com Recovering your cost tax free. Freetaxes com   How you figure the tax-free recovery of the cost of your CSRS or FERS annuity depends on your annuity starting date. Freetaxes com If your annuity starting date is before July 2, 1986, either the Three-Year Rule or the General Rule (both discussed later) applies to your annuity. Freetaxes com If your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method (discussed later). Freetaxes com If your annuity starting date is after November 18, 1996, you must use the Simplified Method. Freetaxes com   Under both the General Rule and the Simplified Method, each of your monthly annuity payments is made up of two parts: the tax-free part that is a return of your cost, and the taxable part that is the amount of each payment that is more than the part that represents your cost (unless such payment is used for purposes discussed under Distributions Used To Pay Insurance Premiums for Public Safety Officers , later). Freetaxes com The tax-free part is a fixed dollar amount. Freetaxes com It remains the same, even if your annuity is increased. Freetaxes com Generally, this rule applies as long as you receive your annuity. Freetaxes com However, see Exclusion limit , later. Freetaxes com Choosing a survivor annuity after retirement. Freetaxes com    If you retired without a survivor annuity and report your annuity under the Simplified Method, do not change your tax-free monthly amount even if you later choose a survivor annuity. Freetaxes com   If you retired without a survivor annuity and report your annuity under the General Rule, you must figure the tax-free part of your annuity using a new exclusion percentage if you later choose a survivor annuity and take reduced annuity payments. Freetaxes com To figure the new exclusion percentage, reduce your cost by the amount you previously recovered tax free. Freetaxes com Figure the expected return as of the date the reduced annuity begins. Freetaxes com For details on the General Rule, see Publication 939. Freetaxes com Canceling a survivor annuity after retirement. Freetaxes com   If you retired with a survivor annuity payable to your spouse upon your death and you notify OPM that your marriage has ended, your annuity might be increased to remove the reduction for a survivor benefit. Freetaxes com The increased annuity does not change the cost recovery you figured at the annuity starting date. Freetaxes com The tax-free part of each annuity payment remains the same. Freetaxes com    For more information about choosing or canceling a survivor annuity after retirement, contact OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D. Freetaxes com C. Freetaxes com calling area must call 202-606-0500). Freetaxes com Exclusion limit. Freetaxes com   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. Freetaxes com Annuity starting date after 1986. Freetaxes com   If your annuity starting date is after 1986, the total amount of annuity income that you (or the survivor annuitant) can exclude over the years as a return of your cost cannot exceed your total cost. Freetaxes com Annuity payments you or your survivors receive after the total cost in the plan has been recovered are generally fully taxable. Freetaxes com Example. Freetaxes com Your annuity starting date is after 1986 and you exclude $100 a month under the Simplified Method. Freetaxes com If your cost is $12,000, the exclusion ends after 10 years (120 months). Freetaxes com Thereafter, your entire annuity is generally fully taxable. Freetaxes com Annuity starting date before 1987. Freetaxes com   If your annuity starting date is before 1987, you can continue to take your monthly exclusion figured under the General Rule or Simplified Method for as long as you receive your annuity. Freetaxes com If you chose a joint and survivor annuity, your survivor can continue to take that same exclusion. Freetaxes com The total exclusion may be more than your cost. Freetaxes com Deduction of unrecovered cost. Freetaxes com   If your annuity starting date is after July 1, 1986, and the cost of your annuity has not been fully recovered at your (or the survivor annuitant's) death, a deduction is allowed for the unrecovered cost. Freetaxes com The deduction is claimed on your (or your survivor's) final tax return as a miscellaneous itemized deduction (not subject to the 2%-of-adjusted-gross-income limit). Freetaxes com If your annuity starting date is before July 2, 1986, no tax benefit is allowed for any unrecovered cost at death. Freetaxes com Simplified Method If your annuity starting date is after November 18, 1996, you must use the Simplified Method to figure the tax-free part of your CSRS or FERS annuity. Freetaxes com (OPM has figured the taxable amount of your annuity shown on your Form CSA 1099R using the Simplified Method. Freetaxes com ) You could have chosen to use either the Simplified Method or the General Rule if your annuity starting date is after July 1, 1986, but before November 19, 1996. Freetaxes com The Simplified Method does not apply if your annuity starting date is before July 2, 1986. Freetaxes com Under the Simplified Method, you figure the tax-free part of each full monthly payment by dividing your cost by a number of months based on your age. Freetaxes com This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Freetaxes com If your annuity starting date is after 1997 and your annuity includes a survivor benefit for your spouse, this number is based on your combined ages. Freetaxes com Worksheet A. Freetaxes com   Use Worksheet A. Freetaxes com Simplified Method (near the end of this publication), to figure your taxable annuity. Freetaxes com Be sure to keep the completed worksheet. Freetaxes com It will help you figure your taxable amounts for later years. Freetaxes com Instead of Worksheet A, you generally can use the Simplified Method Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR to figure your taxable annuity. Freetaxes com However, you must use Worksheet A and Worksheet B in this publication if you chose the alternative annuity option, discussed later. Freetaxes com Line 2. Freetaxes com   See Your cost , earlier, for an explanation of your cost in the plan. Freetaxes com If your annuity starting date is after November 18, 1996, and you chose the alternative annuity option (explained later), you must reduce your cost by the tax-free part of the lump-sum payment you received. Freetaxes com Line 3. Freetaxes com   The number you enter on line 3 is the appropriate number from Table 1 or 2 representing approximate life expectancies in months. Freetaxes com If your annuity starting date is after 1997, use: Table 1 for an annuity without a survivor benefit, or Table 2 for an annuity with a survivor benefit. Freetaxes com If your annuity starting date is before 1998, use Table 1. Freetaxes com Line 6. Freetaxes com   If you received contributions tax free before 2013, the amount previously recovered tax free that you must enter on line 6 is the total amount from line 10 of last year's worksheet. Freetaxes com If your annuity starting date is before November 19, 1996, and you chose the alternative annuity option, this amount includes the tax-free part of the lump-sum payment you received. Freetaxes com Example. Freetaxes com Bill Smith retired from the Federal Government on March 31, 2013, under an annuity that will provide a survivor benefit for his wife, Kathy. Freetaxes com His annuity starting date is April 1, 2013, the annuity is paid in arrears, and he received his first monthly annuity payment on May 1, 2013. Freetaxes com He must use the Simplified Method to figure the tax-free part of his annuity benefits. Freetaxes com Bill's monthly annuity benefit is $1,000. Freetaxes com He had contributed $31,000 to his retirement plan and had received no distributions before his annuity starting date. Freetaxes com At his annuity starting date, he was 65 and Kathy was 57. Freetaxes com Bill's completed Worksheet A is shown later. Freetaxes com To complete line 3, he used Table 2 at the bottom of the worksheet and found that 310 is the number in the second column opposite the age range that includes 122 (his and Kathy's combined ages). Freetaxes com Bill keeps a copy of the completed worksheet for his records. Freetaxes com It will help him (and Kathy, if she survives him) figure the taxable amount of the annuity in later years. Freetaxes com Bill's tax-free monthly amount is $100. Freetaxes com (See line 4 of the worksheet. Freetaxes com ) If he lives to collect more than 310 monthly payments, he will generally have to include in his gross income the full amount of any annuity payments received after 310 payments have been made. Freetaxes com If Bill does not live to collect 310 monthly payments and his wife begins to receive monthly payments, she also will exclude $100 from each monthly payment until 310 payments (Bill's and hers) have been collected. Freetaxes com If she dies before 310 payments have been made, a miscellaneous itemized deduction (not subject to the 2%-of-adjusted- gross-income limit) will be allowed for the unrecovered cost on her final income tax return. Freetaxes com General Rule If your annuity starting date is after November 18, 1996, you cannot use the General Rule to figure the tax-free part of your CSRS or FERS annuity. Freetaxes com If your annuity starting date is after July 1, 1986, but before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method. Freetaxes com If your annuity starting date is before July 2, 1986, you could have chosen to use the General Rule only if you could not use the Three-Year Rule. Freetaxes com Under the General Rule, you figure the tax-free part of each full monthly payment by multiplying the initial gross monthly rate of your annuity by an exclusion percentage. Freetaxes com Figuring this percentage is complex and requires the use of actuarial tables. Freetaxes com For these tables and other information about using the General Rule, see Publication 939. Freetaxes com Three-Year Rule If your annuity starting date was before July 2, 1986, you probably had to report your annuity using the Three-Year Rule. Freetaxes com Under this rule, you excluded all the annuity payments from income until you fully recovered your cost. Freetaxes com After your cost was recovered, all payments became fully taxable. Freetaxes com You cannot use another rule to again exclude amounts from income. Freetaxes com The Three-Year Rule was repealed for retirees whose annuity starting date is after July 1, 1986. Freetaxes com Worksheet A. Freetaxes com Simplified Method for Bill Smith See the instructions in Part II of this publication under Simplified Method. Freetaxes com 1. Freetaxes com Enter the total pension or annuity payments received this year. Freetaxes com Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Freetaxes com $ 8,000 2. Freetaxes com Enter your cost in the plan at the annuity starting date, plus any death benefit exclusion*. Freetaxes com See Your cost in Part II, Rules for Retirees, earlier 2. Freetaxes com 31,000 Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Freetaxes com Otherwise, go to line 3. Freetaxes com   3. Freetaxes com Enter the appropriate number from Table 1 below. Freetaxes com But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below. Freetaxes com 3. Freetaxes com 310 4. Freetaxes com Divide line 2 by the number on line 3 4. Freetaxes com 100 5. Freetaxes com Multiply line 4 by the number of months for which this year's payments were made. Freetaxes com If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Freetaxes com Otherwise, go to line 6 5. Freetaxes com 800 6. Freetaxes com Enter any amounts previously recovered tax free in years after 1986. Freetaxes com This is the amount shown on line 10 of your worksheet for last year 6. Freetaxes com 0 7. Freetaxes com Subtract line 6 from line 2 7. Freetaxes com 31,000 8. Freetaxes com Enter the smaller of line 5 or line 7 8. Freetaxes com 800 9. Freetaxes com Taxable amount for year. Freetaxes com Subtract line 8 from line 1. Freetaxes com Enter the result, but not less than zero. Freetaxes com Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b. Freetaxes com If you are a nonresident alien, also enter this amount on line 1 of Worksheet C. Freetaxes com If your Form CSA 1099R or Form CSF 1099R shows a larger amount, use the amount figured on this line instead. Freetaxes com If you are a retired public safety officer, see Distributions Used To Pay Insurance Premiums for Public Safety Officers in Part II before entering an amount on your tax return or Worksheet C, line 1 9. Freetaxes com $7,200 10. Freetaxes com Was your annuity starting date before 1987?   Yes. Freetaxes com Do not complete the rest of this worksheet. Freetaxes com    No. Freetaxes com Add lines 6 and 8. Freetaxes com This is the amount you have recovered tax free through 2013. Freetaxes com You will need this number if you need to fill out this worksheet next year 10. Freetaxes com 800 11. Freetaxes com Balance of cost to be recovered. Freetaxes com Subtract line 10 from line 2. Freetaxes com If zero, you will not have to complete this worksheet next year. Freetaxes com The payments you receive next year will generally be fully taxable 11. Freetaxes com $30,200 Table 1 for Line 3 Above    IF your age on your  annuity starting date was   AND your annuity starting date was—     before November 19, 1996,  THEN enter on line 3 after November 18, 1996,  THEN enter on line 3   55 or under 300 360   56–60 260 310   61–65 240 260   66–70 170 210   71 or over 120 160  Table 2 for Line 3 Above    IF the annuitants' combined ages on your annuity starting date were   THEN enter on line 3         110 or under   410         111–120   360         121–130   310         131–140   260         141 or over   210       * A death benefit exclusion of up to $5,000 applied to certain benefits received by survivors of employees who died before August 21, 1996. Freetaxes com Alternative Annuity Option If you are eligible, you may choose an alternative form of annuity. Freetaxes com If you make this choice, you will receive a lump-sum payment equal to your contributions to the plan and a reduced monthly annuity. Freetaxes com You are eligible to make this choice if you meet all of the following requirements. Freetaxes com You are retiring, but not on disability. Freetaxes com You have a life-threatening illness or other critical medical condition. Freetaxes com You do not have a former spouse entitled to court ordered benefits based on your service. Freetaxes com If you are not eligible or do not choose this alternative annuity, you can skip the following discussion and go to Federal Gift Tax , later. Freetaxes com Lump-Sum Payment The lump-sum payment you receive under the alternative annuity option generally has a tax-free part and a taxable part. Freetaxes com The tax-free part represents part of your cost. Freetaxes com The taxable part represents part of the earnings on your annuity contract. Freetaxes com Your lump-sum credit (discussed later) may include a deemed deposit or redeposit that is treated as being included in your lump-sum payment even though you do not actually receive such amounts. Freetaxes com Deemed deposits and redeposits, which are described later under Lump-sum credit , are taxable to you in the year of retirement. Freetaxes com Your taxable amount may therefore be more than the lump-sum payment you receive. Freetaxes com You must include the taxable part of the lump-sum payment in your income for the year you receive the payment unless you roll it over into another qualified plan or an IRA. Freetaxes com If you do not have OPM transfer the taxable amount to an IRA or other plan in a direct rollover, tax will be withheld at a 20% rate. Freetaxes com See Rollover Rules , later, for information on how to make a rollover. Freetaxes com OPM can make a direct rollover only up to the amount of the lump-sum payment. Freetaxes com Therefore, to defer tax on the full taxable amount if it is more than the payment, you must add funds from another source. Freetaxes com The taxable part of the lump-sum payment does not qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. Freetaxes com It also may be subject to an additional 10% tax on early distributions if you separate from service before the calendar year in which you reach age 55, even if you reach age 55 in the year you receive the lump-sum payment. Freetaxes com For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575. Freetaxes com Worksheet B. Freetaxes com   Use Worksheet B. Freetaxes com Lump-Sum Payment (near the end of this publication), to figure the taxable part of your lump-sum payment. Freetaxes com Be sure to keep the completed worksheet for your records. Freetaxes com   To complete the worksheet, you will need to know the amount of your lump-sum credit and the present value of your annuity contract. Freetaxes com Lump-sum credit. Freetaxes com   Generally, this is the same amount as the lump-sum payment you receive (the total of your contributions to the retirement system). Freetaxes com However, for purposes of the alternative annuity option, your lump-sum credit also may include deemed deposits and redeposits that OPM advanced to your retirement account so that you are given credit for the service they represent. Freetaxes com Deemed deposits (including interest) are for federal employment during which no retirement contributions were taken out of your pay. Freetaxes com Deemed redeposits (including interest) are for any refunds of retirement contributions that you received and did not repay. Freetaxes com You are treated as if you had received a lump-sum payment equal to the amount of your lump-sum credit and then had made a repayment to OPM of the advanced amounts. Freetaxes com Present value of your annuity contract. Freetaxes com   The present value of your annuity contract is figured using actuarial tables provided by the IRS. Freetaxes com If you are receiving a lump-sum payment under the Alternative Annuity Option, you can write to the address below to find out the present value of your annuity contract. Freetaxes com Internal Revenue Service Attn: Actuarial Group 2 TE/GE SE:T:EP:RA:T:A2 NCA-629 1111 Constitution Ave. Freetaxes com , NW Washington, DC 20224-0002 Example. Freetaxes com David Brown retired from the federal government in 2013, one month after his 55th birthday. Freetaxes com He had contributed $31,000 to his retirement plan and chose to receive a lump-sum payment of that amount under the alternative annuity option. Freetaxes com The present value of his annuity contract was $155,000. Freetaxes com The tax-free part and the taxable part of the lump-sum payment are figured using Worksheet B, as shown below. Freetaxes com The taxable part ($24,800) is also his net cost in the plan, which is used to figure the taxable part of his reduced annuity payments. Freetaxes com See Reduced Annuity , later. Freetaxes com Worksheet B. Freetaxes com Lump-Sum Payment for David Brown See the instructions in Part II of this publication under Alternative Annuity Option . Freetaxes com  1. Freetaxes com Enter your lump-sum credit (your cost in the plan at the annuity starting date) 1. Freetaxes com $ 31,000 2. Freetaxes com Enter the present value of your annuity contract 2. Freetaxes com 155,000 3. Freetaxes com Divide line 1 by line 2 3. Freetaxes com . Freetaxes com 20 4. Freetaxes com Tax-free amount. Freetaxes com Multiply line 1 by line 3. Freetaxes com (Caution: Do not include this amount on line 6 of Worksheet A in this publication. Freetaxes com ) 4. Freetaxes com $6,200 5. Freetaxes com Taxable amount (net cost in the plan). Freetaxes com Subtract line 4 from line 1. Freetaxes com Include this amount in the total on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Freetaxes com Also, enter this amount on line 2 of Worksheet A in this publication. Freetaxes com 5. Freetaxes com $24,800   Lump-sum payment in installments. Freetaxes com   If you choose the alternative annuity option, you usually will receive the lump-sum payment in two equal installments. Freetaxes com You will receive the first installment after you make the choice upon retirement. Freetaxes com The second installment will be paid to you, with interest, in the next calendar year. Freetaxes com (Exceptions to the installment rule are provided for cases of critical medical need. Freetaxes com )   Even though the lump-sum payment is made in installments, the overall tax treatment (explained at the beginning of this discussion) is the same as if the whole payment were paid at once. Freetaxes com If the payment has a tax-free part, you must treat the taxable part as received first. Freetaxes com How to report. Freetaxes com   Add any actual or deemed payment of your lump-sum credit (defined earlier) to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Freetaxes com Add the taxable part to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b, unless you roll over the taxable part to your traditional IRA or a qualified retirement plan. Freetaxes com    If you receive the lump-sum payment in two installments, include any interest paid with the second installment on line 8a of either Form 1040 or Form 1040A, or on line 9a of Form 1040NR. Freetaxes com Reduced Annuity If you have chosen to receive a lump-sum payment under the alternative annuity option, you also will receive reduced monthly annuity payments. Freetaxes com These annuity payments each will have a tax-free and a taxable part. Freetaxes com To figure the tax-free part of each annuity payment, you must use the Simplified Method (Worksheet A). Freetaxes com For instructions on how to complete the worksheet, see Worksheet A under Simplified Method, earlier. Freetaxes com To complete Worksheet A, line 2, you must reduce your cost in the plan by the tax-free part of the lump-sum payment you received. Freetaxes com Enter as your net cost on line 2 the amount from Worksheet B, line 5. Freetaxes com Do not include the tax-free part of the lump-sum payment with other amounts recovered tax free (Worksheet A, line 6) when limiting your total exclusion to your total cost. Freetaxes com Example. Freetaxes com The facts are the same as in the example for David Brown in the preceding discussion. Freetaxes com In addition, David received 10 annuity payments in 2013 of $1,200 each. Freetaxes com Using Worksheet A, he figures the taxable part of his annuity payments. Freetaxes com He completes line 2 by reducing his $31,000 cost by the $6,200 tax-free part of his lump-sum payment. Freetaxes com His entry on line 2 is his $24,800 net cost in the plan (the amount from Worksheet B, line 5). Freetaxes com He does not include the tax-free part of his lump-sum payment on Worksheet A, line 6. Freetaxes com David's filled-in Worksheet A is shown on the next page. Freetaxes com Worksheet A. Freetaxes com Simplified Method for David Brown See the instructions in Part II of this publication under Simplified Method . Freetaxes com 1. Freetaxes com Enter the total pension or annuity payments received this year. Freetaxes com Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Freetaxes com $ 12,000 2. Freetaxes com Enter your cost in the plan at the annuity starting date, plus any death benefit exclusion*. Freetaxes com See Your cost in Part II, Rules for Retirees, earlier 2. Freetaxes com 24,800 Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Freetaxes com Otherwise, go to line 3. Freetaxes com   3. Freetaxes com Enter the appropriate number from Table 1 below. Freetaxes com But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below. Freetaxes com 3. Freetaxes com 360 4. Freetaxes com Divide line 2 by the number on line 3 4. Freetaxes com 68. Freetaxes com 89 5. Freetaxes com Multiply line 4 by the number of months for which this year's payments were made. Freetaxes com If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Freetaxes com Otherwise, go to line 6 5. Freetaxes com 688. Freetaxes com 90 6. Freetaxes com Enter any amounts previously recovered tax free in years after 1986. Freetaxes com This is the amount shown on line 10 of your worksheet for last year 6. Freetaxes com 0 7. Freetaxes com Subtract line 6 from line 2 7. Freetaxes com 24,800 8. Freetaxes com Enter the smaller of line 5 or line 7 8. Freetaxes com 688. Freetaxes com 90 9. Freetaxes com Taxable amount for year. Freetaxes com Subtract line 8 from line 1. Freetaxes com Enter the result, but not less than zero. Freetaxes com Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b. Freetaxes com If you are a nonresident alien, also enter this amount on line 1 of Worksheet C. Freetaxes com If your Form CSA 1099R or Form CSF 1099R shows a larger amount, use the amount figured on this line instead. Freetaxes com If you are a retired public safety officer, see Distributions Used To Pay Insurance Premiums for Public Safety Officers in Part II before entering an amount on your tax return or Worksheet C, line 1 9. Freetaxes com $11,311. Freetaxes com 10 10. Freetaxes com Was your annuity starting date before 1987?   Yes. Freetaxes com Do not complete the rest of this worksheet. Freetaxes com    No. Freetaxes com Add lines 6 and 8. Freetaxes com This is the amount you have recovered tax free through 2013. Freetaxes com You will need this number if you need to fill out this worksheet next year 10. Freetaxes com 688. Freetaxes com 90 11. Freetaxes com Balance of cost to be recovered. Freetaxes com Subtract line 10 from line 2. Freetaxes com If zero, you will not have to complete this worksheet next year. Freetaxes com The payments you receive next year will generally be fully taxable 11. Freetaxes com $24,111. Freetaxes com 10 Table 1 for Line 3 Above    IF your age on your annuity starting date was   AND your annuity starting date was—     before November 19, 1996,  THEN enter on line 3 after November 18, 1996,  THEN enter on line 3   55 or under 300 360   56–60 260 310   61–65 240 260   66–70 170 210   71 or over 120 160  Table 2 for Line 3 Above    IF the annuitants' combined ages on your annuity starting date were   THEN enter on line 3         110 or under   410         111–120   360         121–130   310         131–140   260         141 or over   210       * A death benefit exclusion of up to $5,000 applied to certain benefits received by survivors of employees who died before August 21, 1996. Freetaxes com Reemployment after choosing the alternative annuity option. Freetaxes com If you chose this option when you retired and then you were reemployed by the Federal Government before retiring again, your Form CSA 1099R may show only the amount of your contributions to your retirement plan during your reemployment. Freetaxes com If the amount on the form does not include all your contributions, disregard it and use your total contributions to figure the taxable part of your annuity payments. Freetaxes com Annuity starting date before November 19, 1996. Freetaxes com   If your annuity starting date is before November 19, 1996, and you chose the alternative annuity option, the taxable and tax-free parts of your lump-sum payment and your annuity payments are figured using different rules. Freetaxes com Under those rules, you do not reduce your cost in the plan (Worksheet A, line 2) by the tax-free part of the lump-sum payment. Freetaxes com However, you must include that tax-free amount with other amounts previously recovered tax free (Worksheet A, line 6) when limiting your total exclusion to your total cost. Freetaxes com Federal Gift Tax If, through the exercise or nonexercise of an election or option, you provide an annuity for your beneficiary at or after your death, you have made a gift. Freetaxes com The gift may be taxable for gift tax purposes. Freetaxes com The value of the gift is equal to the value of the annuity. Freetaxes com Joint and survivor annuity. Freetaxes com   If the gift is an interest in a joint and survivor annuity where only you and your spouse can receive payments before the death of the last spouse to die, the gift generally will qualify for the unlimited marital deduction. Freetaxes com This will eliminate any gift tax liability with regard to that gift. Freetaxes com   If you provide survivor annuity benefits for someone other than your current spouse, such as your former spouse, the unlimited marital deduction will not apply. Freetaxes com This may result in a taxable gift. Freetaxes com More information. Freetaxes com   For information about the gift tax, see Publication 950, Introduction to Estate and Gift Taxes, and Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, and its instructions. Freetaxes com Retirement During the Past Year If you have recently retired, the following discussions covering annual leave, voluntary contributions, and community property may apply to you. Freetaxes com Annual leave. Freetaxes com   A payment for accrued annual leave received on retirement is a salary payment. Freetaxes com It is taxable as wages in the tax year you receive it. Freetaxes com Voluntary contributions. Freetaxes com   Voluntary contributions to the retirement fund are those made in addition to the regular contributions that were deducted from your salary. Freetaxes com They also include the regular contributions withheld from your salary after you have the years of service necessary for the maximum annuity allowed by law. Freetaxes com Voluntary contributions are not the same as employee contributions to the Thrift Savings Plan. Freetaxes com See Thrift Savings Plan , later. Freetaxes com Additional annuity benefit. Freetaxes com   If you choose to receive an additional annuity benefit from your voluntary contributions, it is treated separately from the annuity benefit that comes from the regular contributions deducted from your salary. Freetaxes com This separate treatment applies for figuring the amounts to be excluded from, and included in, gross income. Freetaxes com It does not matter that you receive only one monthly check covering both benefits. Freetaxes com Each year you will receive a Form CSA 1099R that will show how much of your total annuity received in the past year was from each type of benefit. Freetaxes com   Figure the taxable and tax-free parts of your additional monthly benefits from voluntary contributions using the rules that apply to regular CSRS and FERS annuities, as explained earlier. Freetaxes com Refund of voluntary contributions. Freetaxes com   If you choose to receive a refund of your voluntary contributions plus accrued interest, the interest is taxable to you in the tax year it is distributed unless you roll it over to a traditional IRA or another qualified retirement plan. Freetaxes com If you do not have OPM transfer the interest to a traditional IRA or other qualified retirement plan in a direct rollover, tax will be withheld at a 20% rate. Freetaxes com See Rollover Rules , later. Freetaxes com The interest does not qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. Freetaxes com It also may be subject to an additional 10% tax on early distributions if you separate from service before the calendar year in which you reach age 55. Freetaxes com For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575. Freetaxes com Community property laws. Freetaxes com   State community property laws apply to your annuity. Freetaxes com These laws will affect your income tax only if you file a return separately from your spouse. Freetaxes com   Generally, the determination of whether your annuity is separate income (taxable to you) or community income (taxable to both you and your spouse) is based on your marital status and domicile when you were working. Freetaxes com Regardless of whether you are now living in a community property state or a noncommunity property state, your current annuity may be community income if it is based on services you performed while married and domiciled in a community property state. Freetaxes com   At any time, you have only one domicile even though you may have more than one home. Freetaxes com Your domicile is your fixed and permanent legal home that you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. Freetaxes com The question of your domicile is mainly a matter of your intentions as indicated by your actions. Freetaxes com   If your annuity is a mixture of community income and separate income, you must divide it between the two kinds of income. Freetaxes com The division is based on your periods of service and domicile in community and noncommunity property states while you were married. Freetaxes com   For more information, see Publication 555, Community Property. Freetaxes com Reemployment After Retirement If you retired from federal service and are later rehired by the Federal Government as an employee, you can continue to receive your annuity during reemployment. Freetaxes com The employing agency usually will pay you the difference between your salary for your period of reemployment and your annuity. Freetaxes com This amount is taxable as wages. Freetaxes com Your annuity will continue to be taxed just as it was before. Freetaxes com If you are still recovering your cost, you continue to do so. Freetaxes com If you have recovered your cost, the annuity you receive while you are reemployed generally is fully taxable. Freetaxes com Nonresident Aliens The following special rules apply to nonresident alien federal employees performing services outside the United States and to nonresident alien retirees and beneficiaries. Freetaxes com A nonresident alien is an individual who is not a citizen or a resident alien of the United States. Freetaxes com Special rule for figuring your total contributions. Freetaxes com   Your contributions to the retirement plan (your cost) also include the government's contributions to the plan to a certain extent. Freetaxes com You include government contributions that would not have been taxable to you at the time they were contributed if they had been paid directly to you. Freetaxes com For example, government contributions would not have been taxable to you if, at the time made, your services were performed outside the United States. Freetaxes com Thus, your cost is increased by these government contributions and the benefits that you, or your beneficiary, must include in income are reduced. Freetaxes com   This method of figuring your total contributions does not apply to any contributions the government made on your behalf after you became a citizen or a resident alien of the United States. Freetaxes com Limit on taxable amount. Freetaxes com   There is a limit on the taxable amount of payments received from the CSRS, the FERS, or the TSP by a nonresident alien retiree or nonresident alien beneficiary. Freetaxes com Figure this limited taxable amount by multiplying the otherwise taxable amount by a fraction. Freetaxes com The numerator of the fraction is the retiree's total U. Freetaxes com S. Freetaxes com Government basic pay, other than tax-exempt pay for services performed outside the United States. Freetaxes com The denominator is the retiree's total U. Freetaxes com S. Freetaxes com Government basic pay for all services. Freetaxes com    Basic pay includes regular pay plus any standby differential. Freetaxes com It does not include bonuses, overtime pay, certain retroactive pay, uniform or other allowances, or lump-sum leave payments. Freetaxes com   To figure the limited taxable amount of your CSRS or FERS annuity or your TSP distributions, use Worksheet C. Freetaxes com (For an annuity, first complete Worksheet A in this publication. Freetaxes com ) Worksheet C. Freetaxes com Limited Taxable Amount for Nonresident Alien 1. Freetaxes com Enter the otherwise taxable amount of the CSRS or FERS annuity (from line 9 of Worksheet A or from Forms CSA 1099R or CSF 1099R) or TSP distributions (from Form 1099R) 1. Freetaxes com   2. Freetaxes com Enter the total U. Freetaxes com S. Freetaxes com Government basic pay other than tax-exempt pay for services performed outside the United States 2. Freetaxes com   3. Freetaxes com Enter the total U. Freetaxes com S. Freetaxes com Government basic pay for all services 3. Freetaxes com   4. Freetaxes com Divide line 2 by line 3 4. Freetaxes com   5. Freetaxes com Limited taxable amount. Freetaxes com Multiply line 1 by line 4. Freetaxes com Enter this amount on Form 1040NR, line 17b 5. Freetaxes com   Example 1. Freetaxes com You are a nonresident alien who performed all services for the U. Freetaxes com S. Freetaxes com Government abroad as a nonresident alien. Freetaxes com You retired and began to receive a monthly annuity of $200. Freetaxes com Your total basic pay for all services for the U. Freetaxes com S. Freetaxes com Government was $100,000. Freetaxes com All of your basic pay was tax exempt because it was not U. Freetaxes com S. Freetaxes com source income. Freetaxes com The taxable amount of your annuity using Worksheet A in this publication is $720. Freetaxes com You are a nonresident alien, so you figure the limited taxable amount of your annuity using Worksheet C as follows. Freetaxes com Worksheet C. Freetaxes com Limited Taxable Amount for Nonresident Alien — Example 1 1. Freetaxes com Enter the otherwise taxable amount of the CSRS or FERS annuity (from line 9 of Worksheet A or from Forms CSA 1099R or CSF 1099R) or TSP distributions (from Form 1099R) 1. Freetaxes com $ 720 2. Freetaxes com Enter the total U. Freetaxes com S. Freetaxes com Government basic pay other than tax-exempt pay for services performed outside the United States 2. Freetaxes com 0 3. Freetaxes com Enter the total U. Freetaxes com S. Freetaxes com Government basic pay for all services 3. Freetaxes com 100,000 4. Freetaxes com Divide line 2 by line 3 4. Freetaxes com 0 5. Freetaxes com Limited taxable amount. Freetaxes com Multiply line 1 by line 4. Freetaxes com Enter this amount on Form 1040NR, line 17b 5. Freetaxes com 0 Example 2. Freetaxes com You are a nonresident alien who performed services for the U. Freetaxes com S. Freetaxes com Government as a nonresident alien both within the United States and abroad. Freetaxes com You retired and began to receive a monthly annuity of $240. Freetaxes com Your total basic pay for your services for the U. Freetaxes com S. Freetaxes com Government was $120,000; $40,000 was for work done in the United States and $80,000 was for your work done in a foreign country. Freetaxes com The part of your total basic pay for your work done in a foreign country was tax exempt because it was not U. Freetaxes com S. Freetaxes com source income. Freetaxes com The taxable amount of your annuity figured using Worksheet A in this publication is $1,980. Freetaxes com You are a nonresident alien, so you figure the limited taxable amount of your annuity using Worksheet C as follows. Freetaxes com Worksheet C. Freetaxes com Limited Taxable Amount for Nonresident Alien — Example 2 1. Freetaxes com Enter the otherwise taxable amount of the CSRS or FERS annuity (from line 9 of Worksheet A or from Forms CSA 1099R or CSF 1099R) or TSP distributions (from Form 1099R) 1. Freetaxes com $ 1,980 2. Freetaxes com Enter the total U. Freetaxes com S. Freetaxes com Government basic pay other than tax-exempt pay for services performed outside the United States 2. Freetaxes com 40,000 3. Freetaxes com Enter the total U. Freetaxes com S. Freetaxes com Government basic pay for all services 3. Freetaxes com 120,000 4. Freetaxes com Divide line 2 by line 3 4. Freetaxes com . Freetaxes com 333 5. Freetaxes com Limited taxable amount. Freetaxes com Multiply line 1 by line 4. Freetaxes com Enter this amount on Form 1040NR, line 17b 5. Freetaxes com 659 Thrift Savings Plan Generally, all of the money in your TSP account is taxed as ordinary income when you receive it. Freetaxes com (However, see Roth TSP balance and Uniformed services TSP accounts, next. Freetaxes com ) This is because neither the contributions to your traditional TSP balance nor its earnings have been included previously in your taxable income. Freetaxes com The way that you withdraw your account balance determines when you must pay the tax. Freetaxes com Roth TSP balance. Freetaxes com   The TSP also offers a Roth TSP option, which allows you to make after-tax contributions into your TSP account. Freetaxes com This means Roth TSP contributions are included in your income. Freetaxes com The contribution limits are the same as the traditional TSP. Freetaxes com You can elect to have part or all of your TSP contributions designated as a Roth TSP. Freetaxes com Agency contributions will be part of your traditional TSP balance. Freetaxes com Also, you cannot roll over any portion of your traditional TSP into your Roth TSP. Freetaxes com   Qualified distributions from your Roth TSP are not included in income. Freetaxes com This applies to both your cost in the account and income earned on that account. Freetaxes com A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. Freetaxes com   For more information, go to the TSP website, www. Freetaxes com tsp. Freetaxes com gov, or the TSP Service Office. Freetaxes com See Publication 575, Pension and Annuity Income, for more information about designated Roth accounts. Freetaxes com Uniformed services TSP accounts. Freetaxes com   If you have a uniformed services TSP account that includes contributions from combat zone pay, the distributions attributable to those contributions are tax exempt. Freetaxes com However, any earnings on those contributions to a traditional TSP balance are subject to tax when they are distributed. Freetaxes com See Roth TSP balance discussed previously to get more information about Roth contributions. Freetaxes com The statement you receive from the TSP will separately state the total amount of your distribution and the amount of your taxable distribution for the year. Freetaxes com You can get more information from the TSP website, www. Freetaxes com tsp. Freetaxes com gov, or the TSP Service Office. Freetaxes com Direct rollover by the TSP. Freetaxes com   If you ask the TSP to transfer any part of the money in your account, from traditional contributions and its earnings, to a traditional IRA or other qualified retirement plan, the tax on that part is deferred until you receive payments from the traditional IRA or other plan. Freetaxes com However, see the following Note for a discussion on direct rollovers by the TSP of Roth contributions and its earnings. Freetaxes com Also, see Rollover Rules , later. Freetaxes com Direct rollover by the TSP to a Roth IRA. Freetaxes com   If you ask the TSP to transfer any part of the money in your account, from traditional contributions and its earnings, to a Roth IRA, the amount transferred will be taxed in the current year. Freetaxes com However, see the following Note for a discussion on direct rollovers by the TSP of Roth contributions and its earnings. Freetaxes com Also, see Rollovers to Roth IRAs for more information, later. Freetaxes com Note. Freetaxes com A direct rollover of your Roth contributions and its earnings (if certain conditions are met, see Roth TSP balance , earlier) in your TSP account to a Roth 401(k), Roth 403(b), Roth 457(b), or Roth IRA are not subject to tax when they are transferred or when you receive payments from those accounts at a later date. Freetaxes com This is because you already paid tax on those contributions. Freetaxes com You cannot rollover Roth contributions and its earnings in your TSP account to a traditional IRA. Freetaxes com TSP annuity. Freetaxes com   If you ask the TSP to buy an annuity with the money in your account, from traditional contributions and its earnings, the annuity payments are taxed when you receive them. Freetaxes com The payments are not subject to the additional 10% tax on early distributions, even if you are under age 55 when they begin. Freetaxes com However, there is no tax on the annuity payments if the annuity is purchased using the money in your account from Roth contributions and its earnings if certain conditions are met. Freetaxes com See Roth TSP balance , earlier. Freetaxes com This is because you already paid tax on those contributions. Freetaxes com Cash withdrawals. Freetaxes com   If you withdraw any of the money in your TSP account, from traditional contributions and its earnings, it is generally taxed as ordinary income when you receive it unless you roll it over into a traditional IRA or other qualified plan. Freetaxes com (See Rollover Rules , later. Freetaxes com ) If you receive your entire TSP account balance in a single tax year, you may be able to use the 10-year tax option to figure your tax. Freetaxes com See Lump-Sum Distributions in Publication 575 for details. Freetaxes com However, there is no tax if you withdraw money in your TSP account from Roth contributions and its earnings if certain conditions are met. Freetaxes com See Roth TSP balance , earlier. Freetaxes com    To qualify for the 10-year tax option, the plan participant must have been born before January 2, 1936. Freetaxes com   If you receive a single payment or you choose to receive your account balance in monthly payments over a period of less than 10 years, the TSP generally must withhold 20% for federal income tax. Freetaxes com If you choose to receive your account balance in monthly payments over a period of 10 or more years or a period based on your life expectancy, the payments are subject to withholding as if you are married with three withholding allowances, unless you submit a withholding certificate. Freetaxes com See also Withholding from Thrift Savings Plan payments earlier under Tax Withholding and Estimated Tax in Part I. Freetaxes com However, there is no withholding requirement for amounts withdrawn from your TSP account that is from Roth contributions and its earnings, if certain conditions are met. Freetaxes com See Roth TSP balance , earlier, for a discussion of those conditions. Freetaxes com Tax on early distributions. Freetaxes com   Any money paid to you from your TSP account before you reach age 59½ may be subject to an additional 10% tax on early distributions. Freetaxes com However, this additional tax does not apply in certain situations, including any of the following. Freetaxes com You receive the distribution and separate from government service during or after the calendar year in which you reach age 55. Freetaxes com You choose to receive your account balance in monthly payments based on your life expectancy. Freetaxes com You are totally and permanently disabled. Freetaxes com You receive amounts from your Roth contributions since that represents a return of your cost (after-tax money). Freetaxes com The earnings may be subject to the 10% tax depending on whether you met certain conditions. Freetaxes com See Roth TSP balance , earlier. Freetaxes com   For more information, see Tax on Early Distributions in Publication 575. Freetaxes com Outstanding loan. Freetaxes com   If the TSP declares a distribution from your account because money you borrowed has not been repaid when you separate from government service, your account is reduced and the amount of the distribution (your unpaid loan balance and any unpaid interest), from traditional contributions and its earnings, is taxed in the year declared. Freetaxes com The distribution also may be subject to the additional 10% tax on early distributions. Freetaxes com However, the tax will be deferred if you make a rollover contribution to a traditional IRA or other qualified plan equal to the declared distribution amount. Freetaxes com See Rollover Rules , later. Freetaxes com   If you withdraw any money from your TSP account in that same year, the TSP must withhold income tax of 20% of the total of the declared distribution and the amount withdrawn. Freetaxes com However, no withholding is required for portions of the distribution that is from Roth contributions and its earnings, if certain conditions are met. Freetaxes com See Roth TSP balance , earlier. Freetaxes com More information. Freetaxes com   For more information about the TSP, see Summary of the Thrift Savings Plan, distributed to all federal employees. Freetaxes com Also, see Important Tax Information About Payments From Your TSP Account and Special Tax Withholding Rules for Thrift Savings Plan Payments to Nonresident Aliens, which are available from your agency personnel office or from the TSP by calling 1-TSP-YOU-FIRST (1-877-968-3778) and for participants who are deaf, hard of hearing, or have a speech disability, call 1-TSP-THRIFT5 (1-877-847-4385). Freetaxes com    The above documents are also available on the TSP website at www. Freetaxes com tsp. Freetaxes com gov. Freetaxes com Select “Forms & Publications. Freetaxes com ” Rollover Rules Generally, a rollover is a tax-free withdrawal of cash or other assets from one qualified retirement plan or traditional IRA and its reinvestment in another qualified retirement plan or traditional IRA. Freetaxes com You do not include the amount rolled over in your income, and you cannot take a deduction for it. Freetaxes com The amount rolled over is taxed later as the new program pays that amount to you. Freetaxes com If you roll over amounts into a traditional IRA, later distributions of these amounts from the traditional IRA do not qualify for the capital gain or the 10-year tax option. Freetaxes com However, capital gain treatment or the 10-year tax option will be restored if the traditional IRA contains only amounts rolled over from a qualified plan and these amounts are rolled over from the traditional IRA into a qualified retirement plan. Freetaxes com To qualify for the capital gain treatment or 10-year tax option, the plan participant must have been born before January 2, 1936. Freetaxes com You can also roll over a distribution from a qualified retirement plan into a Roth IRA. Freetaxes com Although the transfer of a distribution into a Roth IRA is considered a rollover for Roth IRA purposes, it is not a tax-free transfer unless you are rolling over amounts from Roth contributions and its earnings. Freetaxes com See Rollovers to Roth IRAs , later, for more information. Freetaxes com Qualified retirement plan. Freetaxes com   For this purpose, a qualified retirement plan generally is: A qualified employee plan, A qualified employee annuity, A tax-sheltered annuity plan (403(b) plan), or An eligible state or local government section 457 deferred compensation plan. Freetaxes com The CSRS, FERS, and TSP are considered qualified retirement plans. Freetaxes com Distributions eligible for rollover treatment. Freetaxes com   If you receive a refund of your CSRS or FERS contributions when you leave government service, you can roll over any interest you receive on the contributions. Freetaxes com You cannot roll over any part of your CSRS or FERS annuity payments. Freetaxes com   You can roll over a distribution of any part of your TSP account balance except: A distribution of your account balance that you choose to receive in monthly payments over: Your life expectancy, The joint life expectancies of you and your beneficiary, or A period of 10 years or more, A required minimum distribution generally beginning at age 70½, A declared distribution because of an unrepaid loan, if you have not separated from government service (see Outstanding loan under Thrift Savings Plan, earlier), or A hardship distribution. Freetaxes com   In addition, a distribution to your beneficiary generally is not treated as an eligible rollover distribution. Freetaxes com However, see Qualified domestic relations order (QDRO) and Rollovers by surviving spouse , and Rollovers by nonspouse beneficiary , later. Freetaxes com Direct rollover option. Freetaxes com   You can choose to have the OPM or TSP transfer any part of an eligible rollover distribution directly to another qualified retirement plan that accepts rollover distributions or to a traditional IRA or Roth IRA. Freetaxes com   There is an automatic rollover requirement for mandatory distributions. Freetaxes com A mandatory distribution is a distribution made without your consent and before you reach age 62 or normal retirement age, whichever is later. Freetaxes com The automatic rollover requirement applies if the distribution is more than $1,000 and is an eligible rollover distribution. Freetaxes com You can choose to have the distribution paid directly to you or rolled over directly to your traditional or Roth IRA or another qualified retirement plan. Freetaxes com If you do not make this choice, OPM will automatically roll over the distribution into an IRA of a designated trustee or issuer. Freetaxes com No tax withheld. Freetaxes com   If you choose the direct rollover option or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. Freetaxes com However, if the rollover is to a Roth IRA, you may want to choose to have tax withheld since any amount rolled over is generally included in income. Freetaxes com Any part of the eligible rollover distribution paid to you is subject to withholding at a 20% rate. Freetaxes com Direct roll over amounts from Roth contributions and its earnings do not have tax withheld because you already paid tax on those amounts. Freetaxes com Payment to you option. Freetaxes com   If an eligible rollover distribution is paid to you, the OPM or TSP must withhold 20% for income tax even if you plan to roll over the distribution to another qualified retirement plan, traditional or Roth IRA. Freetaxes com However, the full amount is treated as distributed to you even though you actually receive only 80%. Freetaxes com You generally must include in income any part (including the part withheld) that you do not roll over within 60 days to another qualified retirement plan or to a traditional IRA. Freetaxes com Rollovers to Roth IRAs are generally included in income. Freetaxes com Eligible rollover distributions that are from Roth contributions do not have tax withheld because you already paid tax on those amounts. Freetaxes com If you leave government service before the calendar year in which you reach age 55 and are under age 59½ when a distribution is paid to you, you may have to pay an additional 10% tax on any part, including any tax withheld, that you do not roll over. Freetaxes com However, distributions from Roth contributions will not be subject to the 10% additional tax because it is a return of your cost (after-tax money). Freetaxes com Earnings from those contributions may be subject to the 10% additional tax if certain conditions are not met. Freetaxes com See Roth TSP balance , earlier. Freetaxes com Also, see Tax on Early Distributions in Publication 575. Freetaxes com Exception to withholding. Freetaxes com   Withholding from an eligible rollover distribution paid to you is not required if the distributions for your tax year total less than $200. Freetaxes com Partial rollovers. Freetaxes com   A lump-sum distribution may qualify for capital gain treatment or the 10-year tax option if the plan participant was born before January 2, 1936. Freetaxes com See Lump-Sum Distributions in Publication 575. Freetaxes com However, if you roll over any part of the distribution, the part you keep does not qualify for this special tax treatment. Freetaxes com Rolling over more than amount received. Freetaxes com   If you want to roll over more of an eligible rollover distribution than the amount you received after income tax was withheld, you will have to add funds from some other source (such as your savings or borrowed amounts). Freetaxes com Example. Freetaxes com You left government service at age 53. Freetaxes com On February 1, 2013, you receive an eligible rollover distribution of $10,000 from you