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cewoodyard
Returning Member

exclusion of contributions to Fed Gov retirement system

When, how are contributions excluded from AGI?

3 Replies
KarenM90
Employee Tax Expert

exclusion of contributions to Fed Gov retirement system

Generally the contributions you make to retirement plans are made tax deferred.  This means that your contributions are not tax deductible (because you put pre-tax money into the plan) and distributions (all of in part) will be taxable when you retire and receive  begin to withdraw funds from the plan.

 

Please see this link for more details on Federal Employees Retirement Plans: Federal Employees Retirement Plans

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cewoodyard
Returning Member

exclusion of contributions to Fed Gov retirement system

Hi KarenM90
In general, your response is true. My issue is with the government Civil Service Retirement System (CSRS). Contributions to this system are post-tax funds.
IRS Publication 721 “Tax Guide to U.S. Civil Service Retirement Benefits” “For use in preparing 2019 Returns” dated Dec 02, 2019. An included worksheet is included on page 28.
Form CSA 1099R from the Office of Personnel Management (OPM) 9b provides Total Employee Contributions (TEC). The TEC is divided a specific number (exclusion span in months) to determine an annual tax exclusion.
Intuit Turbotax appears to have no knowledge of IRS Publication 721 or CSRS.

 

BillM223
Employee Tax Expert

exclusion of contributions to Fed Gov retirement system

"Intuit Turbotax appears to have no knowledge of IRS Publication 721 or CSRS."

 

Let's don't get ahead of ourselves with sweeping statements.

 

With some taxpayers in CSRS, the OPM knows the amount of after-tax contributions to the plan, and so does the calculation you refer to and plugs the taxable amount in box 2a. If TurboTax asks, tell TurboTax that the 2a amount was used last year.

 

In the instructions for the 1099-R, the IRS says 

"Generally, for qualified plans, section 403(b) plans, and nonqualified commercial annuities, enter in box 5 the employee contributions or insurance premiums recovered tax free during the year based on the method you used to determine the taxable amount to be entered in box 2a."

 

CSRS is a qualified plan.

 

Additionally, the IRS says

"Box 9b. Total Employee Contributions You are not required to enter the total employee contributions or designated Roth contributions in box 9b. However, because this information may be helpful to the recipient, you may choose to report them. If you choose to report the total employee contributions or designated Roth contributions, do not include any amounts recovered tax free in prior years. For a total distribution, report the total employee contributions or designated Roth contributions in box 5 rather than in box 9b."

 

So, first, does the taxable amount in box 2a appear to already have the calculate portion of the "basis" removed from it (compared to box 1)? In this case, when asked, tell TurboTax to use this value.

 

Second, did the 1099-R have entries in either box 5 or box 9b?

 

Third, when asked, did you answer that this was a qualified plan? This would lead you into the dialogue in which the amount of basis being returned would be calculated. Did you see this dialogue?

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