Treatment of TSP as an annuity contract

[JohnsonCharlie]

TurboTax treats my federal Thrift Savings Plan (TSP) as an annuity/pension contract and requires a calculation for the expected return on the contract (total sum of distributions - past, present and future).  See form "Pension, Annuities and IRA Withdrawal; Section 2, Part D).  Since my TSP account fluctuates with the market, how can I determine my total distributions?

[MonikaK1]

If you have separated from Federal service, you should enter your distributions for the tax year exactly as reported on Form 1099-R, and no calculation on your part is required for the Federal return.

If you are referring to a New Jersey state return:

You should not filling out Part D IF you received a one-time 401(k) withdrawal. Part D is for period payments, i.e. monthly payments.

Go back to the 1099-R section.

1. Type "1099-r" in Search in the upper right
2. Select : "Jump to 1099-r:
3. Edit your 1099-R
4. Say Qualified plan (most common) on What kind of retirement plan do you have with...
5. Say NO on Any Periodic Payments?
6. Then go back to New Jersey. Those questions should be gone.

New Jersey taxable income also includes employee contributions to federal Thrift Savings Funds, 403(b), 457, SEP, or any other type of retirement plan other than 401(k) Plans, that are not includible in Federal income. Pennsylvania also taxes TSP contributions.

There is another tax challenge for New Jersey and Pennsylvania traditional TSP participants who make withdrawals as New Jersey or Pennsylvania residents. The tax challenge is that when they withdraw their traditional TSP accounts when they are retired and living in New Jersey or Pennsylvania, the TSP does not remind them which portion of their traditional TSP withdrawal consists of their contributions made via payroll deduction with after-taxed (state) salary. 

The TSP keeps a record of such contributions but does not include the information with a 1099-R (the tax document that shows the gross distribution and the taxable distribution of a traditional TSP distribution made during the year). 

If you were a New Jersey or Pennsylvania resident while employed, you would have been taxed on the contributions already but not the earnings, which would have fluctuated, as you pointed out.

Please see this article from Serving Those Who Serve for an example of this situation for a New Jersey taxpayer and how to handle withdrawals.

[JohnsonCharlie]

MonikaK1, 

Thanks for your response and reference to the publication about New Jersey taxation of TSP contributions.  This is a tricky tax problem, as can be seen by several in the community chat.  To add more complexity, most all federal workers participate in the TSP retirement plan and the federal employees pension plan.  So I entered two 1099-R's (one for my monthly pension payment and another for my random TSP withdrawal) and was prompted to use both the 3-year rule and the general rule for calculating my non-taxable contributions for each plan.   As you suggest below, the NJ state step-by-step handles the inputs for each rule, which then populates the TurboTax form for Pensions and Annuities (very similar to NJ Schedule C form.)  

Now I have to get my total contribution data from the TSP agency so TurboTax can calculate the tax exclusion amount for this year's withdrawal.    The question is whether TurboTax will continue to track the exclusions year after year so I don't exceed my total contributions.  If not, then I will have to keep a running total as a record.  

Thanks, again!