Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits

Choosing the right option. Table 1 may help you decide

The CSRS and FERS are considered eligible retirement

which distribution option to choose. Carefully compare the

plans.

effects of each option.

How to report. If you make this election, reduce the

Table 1. Comparison of Payment to You

otherwise taxable amount of your annuity by the amount

Versus Direct Rollover

excluded. The taxable annuity shown on Form CSA 1099R

does not reflect this exclusion. Report your total distribu-

tions on Form 1040, line 16a; Form 1040A, line 12a; or

Result of a

Form 1040NR, line 17a. Report the taxable amount on

Affected Item

Payment to You

Direct Rollover

Form 1040, line 16b; Form 1040A, line 12b; or Form

There is no

1040NR, line 17b. Enter “PSO” next to the appropriate line

withholding.

on which you report the taxable amount.

However, you

The payer must

If you are retired on disability and reporting your disabil-

may want to

Withholding

withhold 20% of

ity pension on line 7 of Form 1040 or Form 1040A, or line 8

choose

the taxable part.

of Form 1040NR, include only the taxable amount on that

withholding on a

line and enter “PSO” and the amount excluded on the

rollover to a Roth

dotted line next to the applicable line.

IRA.

If you are under

How To Report Benefits

age 59

, a 10%

additional tax

There is no 10%

If you received annuity benefits that are not fully taxable,

may apply to the

additional tax.

report the total received for the year on Form 1040, line

taxable part

Additional tax

See

Tax on early

16a; Form 1040A, line 12a; or Form 1040NR, line 17a.

(including an

distributions,

Also, include on that line the total of any other pension plan

amount equal to

earlier.

payments (even if fully taxable, such as those from the

the tax withheld)

TSP) that you received during the year in addition to the

that is not rolled

annuity. Report the taxable amount of these total benefits

over.

on line 16b (Form 1040), line 12b (Form 1040A), or line

Any taxable part

17b (Form 1040NR). If you use Form 4972, Tax on

Any taxable part

is not income to

Lump-Sum Distributions, however, to report the tax on any

(including the

you until later

amount, do not include that amount on lines 16a and 16b,

taxable part of

distributed to you

lines 12a and 12b, or lines 17a or 17b, instead follow the

When to report

any amount

from the new

Form 4972 instructions.

as income

withheld) not

plan or IRA.

If you received only fully taxable payments from your

rolled over is

However, see

retirement, the TSP, or other pension plan, report on Form

income to you in

Rollovers to Roth

1040, line 16b; Form 1040A, line 12b; or Form 1040NR,

the year paid.

IRAs, earlier, for

line 17b, the total received for the year (except for any

an exception.

amount reported on Form 4972); no entry is required on

line 16a (Form 1040), line 12a (Form 1040A), or line 17a

(Form 1040NR).

Distributions Used To Pay Insurance

Premiums for Public Safety Officers

Part III

If you are an eligible retired public safety officer (law

Rules for Disability

enforcement officer, firefighter, chaplain, or member of a

rescue squad or ambulance crew), you can elect to ex-

Retirement and

clude from income distributions made from an eligible

retirement plan that are used to pay the premiums for

Credit for the Elderly or

accident or health insurance or long-term care insurance.

The premiums can be for coverage for you, your spouse,

the Disabled

or dependents. The distribution must be made directly from

the plan to the insurance provider. You can exclude from

This part of the publication is for federal employees and

income the smaller of the amount of the insurance premi-

retirees who receive disability benefits under the CSRS,

ums or $3,000. You can only make this election for

the FERS, or other federal programs. It also explains the

amounts that would otherwise be included in your income.

tax credit available to certain taxpayers because of age or

The amount excluded from your income cannot be used to

disability.

claim a medical expense deduction.

For this purpose, an eligible retirement plan is a govern-

Disability Annuity

mental plan that is:

•

A qualified trust,

If you retired on disability, the disability annuity you receive

•

from the CSRS or FERS is taxable as wages until you

A section 403(a) plan,

reach minimum retirement age, as explained in this sec-

•

A section 403(b) annuity, or

tion. However, beginning on the day after you reach

mini-

•

A section 457(b) plan.

mum retirement

age, your payments are treated as a

Page 16

Publication 721 (2011)

Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits - 2011 Page 16

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