Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits - 2002 Page 9
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28Example. The facts are the same as in the example for
Annual leave. Treat a payment for accrued annual leave
David Brown in the preceding discussion. In addition,
received on retirement as a salary payment. It is taxable as
David received 10 annuity payments in 2002 of $1,200
wages in the tax year you receive it.
each. Using Worksheet A, he figures the taxable part of his
annuity payments. He completes line 2 by reducing his
Voluntary contributions. Voluntary contributions to the
$31,000 cost by the $6,200 tax-free part of his lump-sum
retirement fund are those made in addition to the regular
payment. His entry on line 2 is his $24,800 net cost in the
contributions that were deducted from your salary. They
plan (the amount from line 5 of Worksheet B). He does not
also include the regular contributions withheld from your
include the tax-free part of his lump-sum payment on line 6
salary after you have the years of service necessary for the
of Worksheet A. David’s filled-in Worksheet A is shown on
maximum annuity allowed by law. Voluntary contributions
the next page.
are not the same as employee contributions to the Thrift
Savings Plan. See Thrift Savings Plan, later.
Reemployment after choosing the alternative
!
annuity option. If you chose this option when
Additional annuity benefit. If you choose an additional
you retired and then you were reemployed by the
CAUTION
annuity benefit from your voluntary contributions, it is
federal government before retiring again, your Form CSA
treated separately from the annuity benefit that comes
1099R may show only the amount of your contributions to
from the regular contributions deducted from your salary.
your retirement plan during your reemployment. If the
This separate treatment applies for figuring the amounts to
amount on the form does not include all your contributions,
be excluded from, and included in, gross income. It does
disregard it and use your total contributions to figure the
not matter that you receive only one monthly check cover-
taxable part of your annuity payments.
ing both benefits. 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.
Annuity starting date before November 19, 1996. If
Figure the taxable and tax-free parts of your additional
your annuity starting date is before November 19, 1996,
monthly benefits from voluntary contributions using the
and you chose the alternative annuity option, the taxable
rules that apply to regular CSRS and FERS annuities, as
and tax-free parts of your lump-sum payment and your
explained earlier.
annuity payments are figured using different rules. Under
Refund of voluntary contributions. If you choose a
those rules, you do not reduce your cost in the plan (line 2
refund of your voluntary contributions plus accrued inter-
of Worksheet A) by the tax-free part of the lump-sum
est, the interest is taxable to you in the tax year it is
payment. However, you must include that tax-free amount
with other amounts previously recovered tax free (line 6 of
distributed unless you roll it over to a traditional IRA or
another qualified retirement plan. If you do not have OPM
Worksheet A) when limiting your total exclusion to your
transfer the interest to a traditional IRA or other qualified
total cost.
retirement plan in a direct rollover, tax will be withheld at a
20% rate. See Rollover Rules, later. The interest does not
Federal Gift Tax
qualify as a lump-sum distribution eligible for capital gain
treatment or the 10-year tax option. It also may be subject
If, through the exercise or nonexercise of an election or
to an additional 10% tax on early distributions if you sepa-
option, you provide an annuity for your beneficiary at or
rate from service before the calendar year in which you
after your death, you have made a gift. The gift may be
reach age 55. For more information, see Lump-Sum Distri-
taxable for gift tax purposes. The value of the gift is equal
butions and Tax on Early Distributions in Publication 575.
to the value of the annuity.
Community property laws. State community property
Joint and survivor annuity. If the gift is an interest in a
laws apply to your annuity. These laws will affect your
joint and survivor annuity where only you and your spouse
income tax only if you file a return separately from your
can receive payments before the death of the last spouse
spouse.
to die, the gift generally will qualify for the unlimited marital
Generally, the determination of whether your annuity is
deduction. This will eliminate any gift tax liability with re-
separate income (taxable to you) or community income
gard to that gift.
(taxable to both you and your spouse) is based on your
If you provide survivor annuity benefits for someone
marital status and domicile when you were working. Re-
other than your current spouse, such as your former
gardless of whether you are now living in a community
spouse, the unlimited marital deduction will not apply. This
property state or a noncommunity property state, your
may result in a taxable gift.
current annuity may be community income if it is based on
More information. For information about the gift tax,
services you performed while married and domiciled in a
see Publication 950, Introduction to Estate and Gift Taxes.
community property state.
At any time, you have only one domicile even though
Retirement During the Past Year
you may have more than one home. Your domicile is your
fixed and permanent legal home to which, when absent,
If you have recently retired, the following discussions cov-
you intend to return. The question of your domicile is
ering annual leave, voluntary contributions, and commu-
mainly a matter of your intentions as indicated by your
nity property may apply to you.
actions.
Page 9
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