Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits - 2011 Page 11
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31Reemployment After Retirement
Additional annuity benefit. If you choose to receive an
additional annuity benefit from your voluntary contribu-
tions, it is treated separately from the annuity benefit that
If you retired from federal service and are later rehired by
comes from the regular contributions deducted from your
the Federal Government as an employee, you can con-
salary. This separate treatment applies for figuring the
tinue to receive your annuity during reemployment. The
amounts to be excluded from, and included in, gross in-
employing agency usually will pay you the difference be-
come. It does not matter that you receive only one monthly
tween your salary for your period of reemployment and
check covering both benefits. Each year you will receive a
your annuity. This amount is taxable as wages. Your annu-
Form CSA 1099R that will show how much of your total
ity will continue to be taxed just as it was before. If you are
annuity received in the past year was from each type of
still recovering your cost, you continue to do so. If you have
benefit.
recovered your cost, the annuity you receive while you are
Figure the taxable and tax-free parts of your additional
reemployed generally is fully taxable.
monthly benefits from voluntary contributions using the
rules that apply to regular CSRS and FERS annuities, as
Nonresident Aliens
explained earlier.
Refund of voluntary contributions. If you choose to
The following special rules apply to nonresident alien fed-
receive a refund of your voluntary contributions plus ac-
eral employees performing services outside the United
crued interest, the interest is taxable to you in the tax year it
States and to nonresident alien retirees and beneficiaries.
is distributed unless you roll it over to a traditional IRA or
A nonresident alien is an individual who is not a citizen or a
another qualified retirement plan. If you do not have OPM
resident alien of the United States.
transfer the interest to a traditional IRA or other qualified
retirement plan in a direct rollover, tax will be withheld at a
Special rule for figuring your total contributions. Your
20% rate. See
Rollover
Rules, later. The interest does not
contributions to the retirement plan (your cost) also include
qualify as a lump-sum distribution eligible for capital gain
the government’s contributions to the plan to a certain
treatment or the 10-year tax option. It also may be subject
extent. You include government contributions that would
to an additional 10% tax on early distributions if you sepa-
not have been taxable to you at the time they were contrib-
rate from service before the calendar year in which you
uted if they had been paid directly to you. For example,
reach age 55. For more information, see Lump-Sum Distri-
government contributions would not have been taxable to
butions and Tax on Early Distributions in Publication 575.
you if, at the time made, your services were performed
outside the United States. Thus, your cost is increased by
Community property laws. State community property
these government contributions and the benefits that you,
laws apply to your annuity. These laws will affect your
income tax only if you file a return separately from your
or your beneficiary, must include in income are reduced.
spouse.
This method of figuring your total contributions does not
Generally, the determination of whether your annuity is
apply to any contributions the government made on your
separate income (taxable to you) or community income
behalf after you became a citizen or a resident alien of the
(taxable to both you and your spouse) is based on your
United States.
marital status and domicile when you were working. Re-
gardless of whether you are now living in a community
Limit on taxable amount. There is a limit on the taxable
property state or a noncommunity property state, your
amount of payments received from the CSRS, the FERS,
current annuity may be community income if it is based on
or the TSP by a nonresident alien retiree or nonresident
services you performed while married and domiciled in a
alien beneficiary. Figure this limited taxable amount by
community property state.
multiplying the otherwise taxable amount by a fraction. The
At any time, you have only one domicile even though
numerator of the fraction is the retiree’s total U.S. Govern-
you may have more than one home. Your domicile is your
ment basic pay, other than tax-exempt pay for services
fixed and permanent legal home that you intend to use for
performed outside the United States. The denominator is
an indefinite or unlimited period, and to which, when ab-
the retiree’s total U.S. Government basic pay for all serv-
sent, you intend to return. The question of your domicile is
ices.
mainly a matter of your intentions as indicated by your
Basic pay includes regular pay plus any standby differ-
actions.
ential. It does not include bonuses, overtime pay, certain
If your annuity is a mixture of community income and
retroactive pay, uniform or other allowances, or lump-sum
separate income, you must divide it between the two kinds
leave payments.
of income. The division is based on your periods of service
To figure the limited taxable amount of your CSRS or
and domicile in community and noncommunity property
FERS annuity or your TSP distributions, use the following
states while you were married.
worksheet. (For an annuity, first complete
Worksheet A
in
For more information, see Publication 555, Community
Property.
this publication.)
Publication 721 (2011)
Page 11
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