If your TSP distribution was the entire balance and you received two separate 1099-R forms, you might qualify for the 10-year forward averaging under special tax rules.
Here's a summary of the requirements for 10-year income averaging:
- The distribution must be from a qualified retirement plan or annuity (IRAs don't count).
- The entire plan balance (excluding employee contributions) must be distributed in one tax year with no rollovers.
- The participant must have been born before January 2, 1936. Beneficiaries can elect income averaging only if the participant meets this requirement.
- The participant must have been in the plan for at least five years before the distribution (this doesn't apply to payments to beneficiaries).
- The participant can't have used the income averaging provision for any previous distribution after 1986.
- The distribution must be payable due to the participant's death, after reaching age 59½, due to separation from service, or after a self-employed individual becomes disabled.
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