Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits - 2002 Page 12
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28Worksheet C. Limited Taxable Amount
1) You separate from government service during or af-
for Nonresident Alien — Example 2
ter the calendar year in which you reach age 55.
1. Enter the otherwise taxable amount of
2) You choose to receive your account balance in
the CSRS or FERS annuity (from line
monthly payments based on your life expectancy.
9 of Worksheet A) or TSP
distributions . . . . . . . . . . . . . . . . . . . 1. $
1,980
3) You retire on disability.
2. Enter the total U.S. Government basic
For more information, see Tax on Early Distributions in
pay other than tax-exempt pay for
Publication 575.
services performed outside the United
States . . . . . . . . . . . . . . . . . . . . . . . 2.
40,000
Outstanding loan. If the TSP declares a distribution from
3. Enter the total U.S. Government basic
your account because money you borrowed has not been
pay for all services . . . . . . . . . . . . . . 3.
120,000
repaid when you separate from government service, your
4. Divide line 2 by line 3 . . . . . . . . . . . . 4.
.333
account is reduced and the amount of the distribution (your
unpaid loan balance and any unpaid interest) is taxed in
5. Limited taxable amount. Multiply
the year declared. The distribution also may be subject to
line 1 by line 4. Enter this amount on
Form 1040NR, line 17b . . . . . . . . . . . 5.
659
the additional 10% tax on early distributions. However, the
tax will be deferred if you make a rollover contribution to a
traditional IRA or other qualified plan equal to the declared
Thrift Savings Plan
distribution amount. See Rollover Rules, next. If you with-
draw any money from your TSP account the same year,
All of the money in your Thrift Savings Plan (TSP) account
the TSP must withhold income tax of 20% of the total of the
is taxed as ordinary income when you receive it. This is
declared distribution and the amount withdrawn.
because neither the contributions to your TSP account nor
its earnings have been included previously in your taxable
More information. For more information about the TSP,
income. The way that you withdraw your account balance
see Summary of the Thrift Savings Plan for Federal Em-
determines when you must pay the tax.
ployees, distributed to all federal employees. Also, see
Important Tax Information About Payments From Your
Direct rollover by the TSP. If you ask the TSP to transfer
TSP Account and Tax Treatment of Thrift Savings Plan
any part of the money in your account to a traditional IRA or
Payments to Nonresident Aliens and Their Beneficiaries,
other qualified retirement plan, the tax on that part is
which are available from your agency personnel office or
deferred until you receive payments from the traditional
from the TSP.
IRA or other plan. See Rollover Rules, later.
The above documents are also available on the
TSP annuity. If you ask the TSP to buy an annuity with the
Internet at Select “Forms & Publi-
money in your account, the annuity payments are taxed
cations.”
when you receive them. The payments are not subject to
the additional 10% tax on early distributions, even if you
are under age 55 when they begin.
Rollover Rules
Cash withdrawals. If you withdraw any of the money in
A rollover is a tax-free withdrawal of cash or other assets
your TSP account, it is taxed as ordinary income when you
from one qualified retirement plan or traditional IRA and its
receive it unless you roll it over into a traditional IRA or
reinvestment in another qualified retirement plan or tradi-
other qualified plan. (See Rollover Rules, later.) If you
tional IRA. Do not include the amount rolled over in your
receive your entire TSP account balance in a single tax
income, and you cannot take a deduction for it. The
year, you may be able to use the 10-year tax option to
amount rolled over is taxed later as the new program pays
figure your tax. See Lump-Sum Distributions in Publication
that amount to you. If you roll over amounts into a tradi-
575 for details.
tional IRA, later distributions of these amounts from the
If you receive a single payment or you choose to receive
traditional IRA do not qualify for the capital gain or the
your account balance in monthly payments over a period of
10-year tax option. However, capital gain treatment or the
less than 10 years, the TSP generally must withhold 20%
10-year tax option will be restored if the traditional IRA
for federal income tax. If you choose to receive your ac-
contains only amounts rolled over from a qualified plan and
count balance in monthly payments over a period of 10 or
these amounts are rolled over from the traditional IRA into
more years or a period based on your life expectancy, the
a qualified retirement plan.
payments are subject to withholding under the same rules
as your CSRS or FERS annuity. See Tax Withholding and
Qualified retirement plan. For this purpose, a qualified
Estimated Tax in Part I.
retirement plan generally is:
Tax on early distributions. Any money paid to you
•
from your TSP account before you reach age 59
1
/
may be
A qualified employee plan,
2
subject to an additional 10% tax on early distributions.
•
A qualified employee annuity,
However, this additional tax does not apply in any of the
•
following situations.
A tax-sheltered annuity plan (403(b) plan), or
Page 12
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