BillM223
Expert Alumni

Retirement tax questions

The IRS says: "The CSRS, FERS, and TSP annuities are considered qualified retirement plans.  You can find information about computing the taxable portion of your annuity by going to IRS Publication 721 (Tax Guide to U.S. Civil Service Retirement Benefits) on the Internal Revenue Service website." See this OPM webpage.

 

The way that TurboTax handles this is after you enter your 1099-R or CSA-1099-R, then you are asked some questions on a series of screens.

 

If your federal retirement plan is one of the ones listed above, then you answered that it is a qualified plan.

 

TurboTax will ask you if you got regular payments over the year (generally yes), and then ask you when the payments started. 

 

Then TurboTax will ask you if the taxable amount used in previous years was the same amount as in box 2a. If it was, great, the OPM already is dealing with your voluntary contributions.

 

But it not, then check "no, a different amount was used" and continue. TurboTax will next ask you which method you want to use to figure the taxable amount (most people have to use the Simplified Method). Check that and Continue.

 

Then TurboTax will ask you that start date of the annuity, the Plan cost (this is the amount of after-tax contributions that you put in), the number of months you received payments in 2019 (generally 12), and the tax-free amount previous recovered***.

 

*** The Learn More link says this about that last box: "

If this is not the first year of your pension distribution and you computed part of your distribution in past years as being nontaxable, you must enter an amount here. Not everyone has a nontaxable amount to enter. If all your pension contributions were pre-tax, then leave this field blank.

If you transferred in your data from last year's program, we enter this information for you. If not, you must compute this entry by adding all prior years' nontaxable amounts."

 

So you may or may not need to enter an amount here (if you used TurboTax last year).

 

The next screen asks if this pension/annuity covers just you or you and a spouse. Then you will be asked your age on the date that the annuity started.

 

Armed with all this data, TurboTax will use the Simplified Method to determine how much of your "plan cost" (your after-tax contributions) are returned to you tax-free this year.

 

If box 2a on the CSA-1099-R is a different amount than box 1, then it's possible that the OPM has already done this for you. In this case, you avoid all these questions by indicating earlier that the box 2a amount was used as the taxable amount in the previous year.

 

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