A Tax To-Do List

There is some good information on these issues in . Medicare Part B premiums are means-tested: If you have a higher adjusted gross income, you pay a higher premium. Most people will pay a Part B premium of $104.90 per month in 2013. However, if your modified adjusted gross income as reported on your IRS tax return from two years ago is above a certain amount, you may pay more. Here’s . Not long ago, a client of mine took a $20,000 distribution that increased the taxation of his Social Security and Medicare benefits so much he vowed never to do it again without calling first. He somehow thought he could just take out $20,000 and have $20,000 to spend. Had he called, I would have suggested he take some or all of the amount from a savings account that would be nontaxable -- or even borrow the money. The easiest and safest way is to file an estimated tax form. The form is very simple. The amount to be paid can easily be calculated by multiplying the monthly annuity check by the state tax rate. For example, let’s say your monthly annuity is $2,000 and your state’s income tax rate is 5 percent. That’s $100 per month. You could pay $300 in four estimated tax payments, which are generally due April 15, June 15, Sept. 15 and Jan. 15 of the following year. Another way to pay the state tax is to have excess state withholdings either before retirement or once the annuity is finalized. The National Active and Retired Federal Employees Association publishes a list of all of the states that do not tax federal retirement benefits, usually in the March or April issue of its magazine. Also, Kiplinger provides an . While you work, you contribute to either the Civil Service Retirement System or the Federal Employees Retirement System in your biweekly salary payments. This payment is generally 7 percent for CSRS employees (7.5 percent for certain special groups) and 0.8 percent for FERS employees (1.3 percent for special groups). These contributions are withheld after tax, meaning that you’ve already paid taxes on this part of your future retirement benefit. Tax law allows you to divide the total contributions by your life expectancy (based on IRS tables). The result of this is the nontaxable portion of the annuity. See for information on the calculation, which OPM generally makes for you. States generally follow the federal calculation. In addition, some states offer other tax incentives. The best source for this information is the NARFE magazine mentioned above. The short answer is, take out as little as possible from your TSP. This is because a distribution from a traditional TSP (as opposed to the new Roth option) is generally fully taxable, and the TSP is required to withhold 20 percent for pre-payment of federal tax from a lump sum payment or when your monthly payments are expected to last 10 years or less. The TSP will not withhold any state income tax from your lump sum distribution.