Part I General Information

This part of the publication contains information that can apply to most recipients of civil service retirement benefits.

Refund of Contributions

If you leave federal government service or transfer to a job not under the CSRS or FERS and you are not eligible for an immediate annuity, you can choose to receive a refund of the money in your CSRS or FERS retirement account. The refund will include both regular and voluntary contributions you made to the fund, plus any interest payable.

If the refund includes only your contributions, none of the refund is taxable. If it includes any interest, the interest is taxable unless you roll it over into another qualified plan or a traditional individual retirement arrangement (IRA). If you do not have the Office of Personnel Management (OPM) transfer the interest to an IRA or other plan in a direct rollover, tax will be withheld at a 20% rate. See Rollover Rules in Part II for information on how to make a rollover.

If you do not roll over interest included in your refund, it may qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. If you separate from service before the calendar year in which you reach age 55, it may be subject to an additional 10% tax on early distributions. For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575.

Interest is not paid on contributions to the CSRS for service after 1956 unless your service was for more than 1 year but not more than 5 years. Therefore, many employees who withdraw their contributions under the CSRS do not get interest and do not owe any tax on their refund.

Tax Withholding and Estimated Tax

The CSRS or FERS annuity you receive is subject to federal income tax withholding based on tables prepared by the Internal Revenue Service, unless you choose not to have tax withheld. OPM will tell you how to make the choice. The choice for no withholding remains in effect until you change it. These withholding rules also apply to a disability annuity, whether received before or after minimum retirement age.

If you choose not to have tax withheld, or if you do not have enough tax withheld, you may have to make estimated tax payments.

You may owe a penalty if the total of your withheld tax and estimated tax does not cover most of the tax shown on your return. Generally, you will owe the penalty if the additional tax you must pay with your return is $1,000 or more and more than 10% of the tax shown on your return. For more information, including exceptions to the penalty, see chapter 4 of Publication 505, Tax Withholding and Estimated Tax.

Form CSA 1099R. Form CSA 1099R is mailed to you by OPM each year. It will show any tax you had withheld. File a copy of Form CSA 1099R with your tax return if any federal income tax was withheld.

Choosing no withholding on payments outside the United States. The choice for no withholding generally cannot be made for annuity payments to be delivered outside the United States and its possessions.

To choose no withholding if you are a U.S. citizen or resident, you must provide OPM with your home address in the United States or its possessions. Otherwise, OPM has to withhold tax. For example, OPM must withhold if you provide a U.S. address for a nominee, trustee, or agent (such as a bank) to whom the benefits are to be delivered, but you do not provide your own U.S. home address.

You also may choose no withholding if you certify to OPM that you are not a U.S. citizen, a U.S. resident alien, or someone who left the United States to avoid tax. But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. For details, see Publication 519, U.S.Tax Guide for Aliens.

Withholding certificate. If you give OPM a Form W-4P-A, Election of Federal Income Tax Withholding, choosing withholding, your annuity will be treated like wages for income tax withholding purposes. If you do not make a choice, OPM must withhold as if you were married with three withholding allowances.

To change the amount of tax withholding or to stop withholding, call OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D.C. calling area must call 202-606-0500), or call Annuitant Express at 1-800-409-6528. No special form is needed. You will need your retirement claim number (CSA or CSF) and your social security number when you call. If you have TTY/TDD equipment, call 1-800-878-5707.

You can also change the amount of withholding or stop withholding through the Internet at www.servicesonline.opm.gov. You will need your retirement claim number (CSA or CSF) and your Personal Identification Number (PIN). To get a PIN, call the OPM's Retirement Information Office. (See the preceding paragraph for telephone numbers.)

Withholding from certain lump-sum payments. If you leave the federal government before becoming eligible to retire and you apply for a refund of your CSRS or FERS contributions, or you die without leaving a survivor eligible for an annuity, you or your beneficiary will receive a distribution of your contributions to the retirement plan plus any interest payable. Tax will be withheld at a 20% rate on the interest distributed. However, tax will not be withheld on the interest if you roll it over to a traditional IRA or a qualified plan by having OPM transfer it directly to the traditional IRA or other plan. See Rollover Rules in Part II. If you receive only your contributions, no tax will be withheld.

If you retire and elect to receive a reduced annuity and a lump-sum payment under the alternative annuity option, tax will be withheld at a 20% rate on the taxable part of the lump-sum payment received. (See Alternative Annuity Option in Part II for information about this option.) However, no tax will be withheld from the lump sum if you roll the taxable part over to a traditional IRA or a qualified plan by having OPM transfer the taxable part directly to a traditional IRA or other plan.

Withholding from Thrift Savings Plan payments. Generally, a distribution that you receive from the Thrift Savings Plan (TSP) is subject to federal income tax withholding. The amount withheld is:

• 20% if the distribution is an eligible rollover distribution, or
• 10% if it is a nonperiodic distribution other than an eligible rollover distribution, or
• An amount determined by treating the payment as wages, if it is a periodic distribution.

However, you can usually choose not to have tax withheld from TSP payments other than eligible rollover distributions. By January 31 after the end of the year in which you receive a distribution, the TSP will issue Form 1099-R showing the total distributions you received in the prior year and the amount of tax withheld.

For a detailed discussion of withholding on distributions from the TSP, see Important Tax Information About Payments From Your TSP, available from your agency personnel office or from the TSP.

The above document is also available on the Internet at www.tsp.gov. Select "Forms & Pubs," then select "Other Documents."

Estimated tax. Generally, you should make estimated tax payments for 2002 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and your credits to be less than the smaller of:

1. 90% of the tax to be shown on your income tax return for 2002, or
2. The tax shown on your 2001 income tax return (112% of that amount if the adjusted gross income shown on the return was more than $150,000 ($75,000 if your filing status for 2002 will be married filing separately)). The return must cover all 12 months.

You do not have to pay estimated tax for 2002 if you were a U.S. citizen or resident for all of 2001 and you had no tax liability for the full 12-month 2001 tax year.

Form 1040-ES contains a worksheet that you can use to see if you should make estimated tax payments. For more information, see chapter 2 in Publication 505.

Filing Requirements

If your gross income, including the taxable part of your annuity, is less than a certain amount, you generally do not have to file a federal income tax return. The gross income filing requirements are in the instructions to the Form 1040, 1040A, or 1040EZ, that you get each year. You should check these requirements closely because they change occasionally.

Children. If you are the surviving spouse of a federal employee or retiree and your monthly annuity check includes a survivor annuity for one or more children, each child's annuity counts as his or her own income (not yours) for federal income tax purposes.

If your child can be claimed as a dependent, treat his or her annuity as unearned income to apply the filing requirements.

Form CSF 1099R. By January 31 after the end of each tax year, you should receive Form CSF 1099R, which will show the total amount of the annuity you received in the past year. It also should show, separately, the survivor annuity for a child or children. Only the part that is each individual's survivor annuity should be shown on that individual's Form 1040 or 1040A.

If your Form CSF 1099R does not show separately the amount paid to you for a child or children, attach a statement to your return, along with a copy of Form CSF 1099R, explaining why the amount shown on the tax return differs from the amount shown on Form CSF 1099R.

You may request a Summary of Payments, showing the amounts paid to you for your child(ren), from OPM by calling OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D.C. calling area must call 202-606-0500). You will need your CSF claim number and your social security number when you call.

Taxable part of annuity. To find the taxable part of each annuity, see the discussion in Part IV, Rules for Survivors of Federal Employees, or Part V, Rules for Survivors of Federal Retirees, whichever applies.