By Mike Miles
April 23rd, 2014 | Uncategorized
Q. I am a FERS retiree. I receive a small annuity and Medicare; both are taxed. This year, however, I made a partial distribution from my TSP account (federal taxes of $17,000 were withheld). As I prepared my taxes I found that the TSP withdrawal combined with my annuity and Medicare puts me in a higher tax bracket, and now I owe $10,000 more in taxes. How do I offset this obligation if the TSP taxes were already paid? Can I file the TSP distribution separately or transfer it to a Roth account?
A. The $17,000 was not tax; it was a deposit against your tax liability. When you prepare your return, you calculate the tax you owe, and then you are permitted to deduct whatever deposits you made during the year (withholding or estimated tax payments), including the $17,000. Any difference between the tax and the amount on deposit will be what you owe or receive as a refund. Either you failed to account for the $17,000 you deposited, or your tax obligation is $10,000 greater than what you deposited during the year.
Comments are closed.