From The Mailbag: Retiree Tax Questions

The Mailbag brings us Retiree Tax Questions

Tax time always brings a lot of questions from readers.  Today’s post is a compilation of tax-related questions received from retirees:

Taxable vs. Non-Taxable Retirement Income

Dear Kate:  I am retired with 20% disability.   My 1099R shows gross distribution of 60000 and taxable amount of 60000. My question is:  When do I figure in the 20% figure?  TQ

Dear TQ,

The amount represented on your 1099R should represent only the military retirement portion of your compensation.  Your disability compensation is non-taxable and there is no tax statement generated for it.

If the amounts shown on your Retiree Account Statements (RAS) do not add up to the amount shown on your 1099R, then you may have an incorrect 1099R and you may need to ask for an updated statement from the Defense Finance and Accounting Service (DFAS.)

I hope that helps,

Kate

Getting A 1099R For A Deceased Member

Dear Kate,

I need my husband’s 1099R for his pay for the months that he lived in 2015.

Mrs. Murray

Dear Mrs. Murray,

My condolences for the loss of your husband.

1099Rs are not automatically generated for deceased members.  You will need to request the 1099R from the Defense Finance and Accounting Service (DFAS).  Unfortunately, telephone is the best way and waits can be long.  The telephone number is 1 888-332-7411.

Good luck to you,

Kate

Taxes With A Second Career

Kate, I retired from the military in late 2014, and started a civilian job in early 2015.  I’ve finished our income tax return and we owe thousands of dollars!  What happened?  Joe G.

Dear Joe,

Getting income tax withholding right is hard under the best of situations, and it can be particularly tricky for new retirees.  You need to update the amount you are having withheld from both your retirement pay and the income from your new job.    Be sure to include the fact that you have “another job” when using the withholding worksheet.

Once you’ve made the changes, check back in a few months and see if you are having enough withheld.  Many retirees have to claim 0 exemptions and have additional amounts withheld from each check in order to have enough total withholding over the course of the year.

Congratulations on your retirement!

Kate

Retirement changes your whole tax situation. Don’t stop learning!

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.