New from NARFE
Increased Taxes from Your Annuity

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The Partnership for Public Service

 OPM Tax Hotline

In response to high call volume because of the February increase in withholding, the Office of Personnel Management has established a new Tax Hotline that retirees can call to change the federal tax withholding on their monthly annuity payments. The number is 800-307-8298.

Dave Snell, Retirement Benefits, dsnell@narfe.org

 

The following is from a Washington Post Federal Diary item on Feb 8:

We asked OPM to explain why this is happening now.

A spokeswoman referred us to an announcement on OPM's Web site that says the Internal Revenue Service "did not release the 2011 income tax withholding tables until mid-December 2010. OPM did not receive the tax withholding tables in time to apply them to your January 3, 2011 annuity payment."Withholding tables are used to calculate taxes based on income ranges.The OPM announcement says "the 2011 income tax withholding amounts have now been applied and will affect your February 1, 2011, payment and all subsequent payments in 2011." An OPM fact sheet notes that "many individuals will pay more federal tax for 2011" because the Making Work Pay tax credit expired Dec. 31.On the issue of customer service, OPM Director John Berry said the agency is hiring more people to deal with annuity-related issues.

 

 To Change Withholding or Not

  I notified our chapter members in February 2010 when everyone's check went up $35 to $50 that they should contact OPM and increase their tax withholding or keep the increase in their checking account because they may have to pay some or all of it back when they filed their 2010 tax return. I would recommend that members wait to see if they have a tax liability for 2010 before requesting to have their withholding reduced to the 2010 level again or they may have to pay again when they file their 2011 return. Once you know what your tax liability for 2010 is, then make a decision if you want to have a decrease in your withholding. Remember the tax withhold decease in 2010 did not change your tax liability for 2010.

   If was basically an attempt to put more money into the economy without the money coming from the government.

 Mike Teefy, Vancouver Chapter