Not claiming tax free portion of CSRS annuity properly
Hello,
I recently discovered a federal retiree didn’t claim the tax free portion of his CSRS annuity for several years when he filed his own return. It’s been over 3 years so we cannot amend the returns. Is it possible to simply continue the allowed tax free amount until he has fully recovered his after-tax contributions even though it would be beyond the number of months allows in the calculation (since he began receiving his annuity)? For example, one example in Publication 721 uses 310 months as the period to recover his $31k in contributions, each year his tax free amount is $1,200. If he failed to claim the first five years, could he still claim at a rate of $1,200 per year until he recovers the $31k even though it would be over 370 months (although still calculated at the 310 month rate)
Thanks for any help!
Permalink Submitted by David Mertz on Fri, 2018-02-02 13:32
Not claiming the tax-free portion on the tax returns for the closed tax years does not change the fact that the tax-free amounts were distributed in those years. The tax savings that would have been had by properly reporting the tax-free portion of those distributions is simply lost. The application of the tax-free amounts from those years cannot be deferred to later years.