Question on "What did you do with your money from the OPM?"

[Dawson1977]

Hi.  My wife retired from the US Federal Courts.  She has a pension which is paid to her every month (deposited in a savings account).  Turbo Tax asks what she did with the money (moved to another retirement account, returned it to the same account, cashed it out, etc).  The way this is answered leads to either a refund or a significant amount owed.  This is confusing.  Her monthly annuity payment from the OPM is essentially a paycheck, out of which federal and state taxes are taken out.  As far as I know, she doesn't return it to the same account, cash it out, etc.  It's just deposited in a savings account after taxes are taken out.  How do I answer these questions?  We shouldn't be paying a significant amount more of federal tax after we are already paying a significant amount of federal tax already.  Thank you

[DoninGA]

Since it is pension income just select 'did something else, cashed it out, etc'

[Dawson1977]

Thanks.  However, she has never owed additional tax in the past.  When I do as you suggest, it's saying that we now owe $2500 more.

[DoninGA]

The pension income reported in box 2a of the form is entered on the tax return as ordinary income and added to the other income being reported on the tax return.  The federal taxes withheld (if any) reported in box 4 of the form are entered on the tax return as a tax payment.

If your total tax payments are greater then your total tax liability you will get a tax refund for the overpayment.

If your total tax payments are less than your total tax liability you will have taxes owed.

If using the TurboTax desktop CD/Download editions installed on a personal computer, click on Forms.

When in Forms mode review the Form 1040 line items to see why you have taxes owed.