Publication 721 |
2000 Tax Year |
Part I General Information
This part of the publication contains information that can apply to
most recipients of civil service retirement benefits.
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. The refund will include both regular and
voluntary contributions you made to the fund, plus any interest
payable.
If the refund includes only your contributions, none of the refund
is taxable. If it includes any interest, the interest is taxable
unless you roll it over into another qualified plan or a traditional
individual retirement arrangement (IRA). 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. See
Rollover Rules in Part II for information on how to make a
rollover.
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. It may also 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. For more information, see
Lump-Sum Distributions and Tax on Early Distributions
in Publication 575.
Interest is not paid on contributions to the CSRS for service after
1956 unless your service was for more than 1 year but less than 5
years. Therefore, many employees who withdraw their contributions
under the CSRS do not get interest and do not owe any tax on their
refund.
Tax Withholding
and Estimated Tax
The CSRS or FERS annuity you receive is subject to federal income
tax withholding based on tables prepared by the Internal Revenue
Service, unless you choose not to have tax withheld. The Office of
Personnel Management will tell you how to make the choice. The choice
for no withholding remains in effect until you change it. These
withholding rules also apply to a disability annuity, whether received
before or after minimum retirement age.
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.
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.
Generally, you will owe the penalty if the additional tax you must pay
with your return is $1,000 or more and more than 10% of the tax shown
on your return. For more information, including exceptions to the
penalty, see chapter 4 of Publication 505,
Tax Withholding and
Estimated Tax.
Form CSA 1099R.
Form CSA 1099R is mailed to you by OPM each year. It will show any
tax you had withheld. File copy B of Form CSA 1099R with your return
if any federal income tax was withheld.
Choosing no withholding on payments outside the United
States.
The choice for no withholding generally cannot be made for annuity
payments to be delivered outside the United States and its
possessions.
To choose no withholding if you are a U.S. citizen or resident, you
must provide OPM with your home address in the United States or its
possessions. Otherwise, OPM has to withhold tax. For example, OPM must
withhold if you provide a U.S. 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.S. home address.
You also may choose no withholding if you certify to OPM that you
are not a U.S. citizen, a U.S. resident alien, or someone
who left the United States to avoid tax. But if you so certify, you
may be subject to the 30% flat rate withholding that applies to
nonresident aliens. For details, see Publication 519,
U.S.Tax
Guide for Aliens.
Withholding certificate.
If you give OPM a Form W-4P-A, Election of Federal Income Tax
Withholding, choosing withholding, your annuity will be treated
like wages for income tax withholding purposes. If you do not make a
choice, OPM must withhold as if you were married with three
withholding allowances.
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.C., calling area must call
202-606-0500), or call Annuitant Express at 1-800-409-6528. If you
have TDD equipment, call 1-800-878-5707. No special form is needed.
You will need your retirement claim number (CSA or CSF) and your
social security number when you call.
You can also change the amount of withholding or stop withholding
through the Internet at www.servicesonline.opm.gov. You
will need your retirement claim number (CSA or CSF) and your Personal
Identification Number (PIN). To get a PIN, call the OPM's Retirement
Information Office. (See the preceding paragraph for telephone
numbers.)
Withholding from certain lump-sum payments.
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. Tax will be withheld at
a 20% rate on the interest distributed. However, tax will not be
withheld on the interest if you roll it over to a traditional IRA or a
qualified plan by having OPM transfer it directly to the traditional
IRA or other plan. See Rollover Rules in Part II. If you
receive only your contributions, no tax will be withheld.
If you retire and elect to receive a reduced annuity and a lump-sum
payment under the alternative annuity option, tax will be withheld at
a 20% rate on the taxable part of the lump-sum payment received. (See
Alternative Annuity Option in Part II for information about
this option.) However, no tax will be withheld from the lump sum if
you roll the taxable part over to a traditional IRA or a qualified
plan by having OPM transfer the taxable part directly to a traditional
IRA or other plan.
Withholding from Thrift Savings Plan payments.
Generally, a distribution that you receive from the Thrift Savings
Plan (TSP) is subject to federal income tax withholding. The amount
withheld is:
- 20% if the distribution is an eligible rollover
distribution, or
- 10% if it is a nonperiodic distribution other than an
eligible rollover distribution, or
- An amount determined by treating the payment as wages, if it
is a periodic distribution.
However, you can usually choose not to have tax withheld from TSP
payments other than eligible rollover distributions. By January 31
after the end of the year in which you receive a distribution, the TSP
will issue Form 1099R showing the total distributions you
received in the prior year and the amount of tax withheld.
For a detailed discussion of withholding on distributions from the
TSP, see Important Tax Information About Payments From Your
Thrift Savings Plan Account (Rev. July 1998), available from
your agency personnel office or from the TSP.
The above document is also available on the Internet at
www.tsp.gov. Select "Forms & Publications," then
select "Other Documents."
Estimated tax.
Generally, you should make estimated tax payments for 2001 if you
expect to owe at least $1,000 in tax (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
2001, or
- The tax shown on your 2000 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 2001 will be married
filing separately)). The return must cover all 12 months.
You do not have to pay estimated tax for 2001 if you were a U.S.
citizen or resident for all of 2000 and you had no tax liability for
the full 12-month 2000 tax year.
Form 1040-ES contains a worksheet that you can use to see if you
should make estimated tax payments. For more information, see chapter
2 in Publication 505.
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. The gross income filing requirements are in
the instructions to the Form 1040, 1040A, or 1040EZ, that you get each
year. You should check these requirements closely because they change
occasionally.
Children.
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.
If your child can be claimed as a dependent, treat his or her
annuity as unearned income to apply the filing requirements.
Form CSF 1099R.
By January 31 after the end of each tax year, you should receive
Form CSF 1099R, which will show the total amount of the annuity you
received in the past year. It should also separately show the survivor
annuity for a child or children. Only the part that is each
individual's survivor annuity should be shown on that individual's
Form 1040 or 1040A.
If your Form CSF 1099R does not separately show 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.
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.C. calling area must call (202) 606-0500). You
will need your CSF claim number and your social security number when
you call.
Taxable part of annuity.
To find the taxable part of each annuity, see the discussion in
Part IV, Rules for Survivors of Federal Employees, or Part
V, Rules for Survivors of Federal Retirees, whichever
applies.
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