If you have been a federal employee and are seeking to receive disability retirement income, you might have to pay taxes on that income. This isn’t pleasant news, but the following article can help you prepare for what’s next.
Common Kinds of Federal Disability Retirement Income
The first step federal employees should take to understand their tax liabilities on federal disability retirement payments is to understand what kind of federal benefits they’re receiving.
Common retirement benefits a federal employee might receive include:
- Social Security Disability Income (SSDI),
- Disability retirement income from the Federal Employees’ Retirement System (FERS),
- Disability retirement income from the Civil Service Retirement System (CSRS),
- Military Disability Retirement Pay (MDRP, and
- Veterans’ benefits.
The Office of Personnel Management (OPM) handles many matters related to FERS and CSRS payments.
Some of the above-listed benefits are taxable, and some aren’t. For payments and benefits that are taxable, they are taxable at different levels.
Is OPM Disability Retirement Taxable at the Federal Level?
OPM oversees matters regarding FERS and CSRS disability retirement payments.
Is FERS disability retirement taxable at the federal level?
Some FERS disability retirement is taxable.
Individuals can receive FERS disability retirement if they have certain characteristics, including:
- Completion of at least 18 months of creditable Federal civilian service,
- A disabling condition that affects their work and is expected to last for at least a year,
- The inability to receive accommodations from their employer, and
- Status as an applicant or recipient of Social Security benefits.
Recipients of a FERS disability retirement annuity do show these benefits as taxable income.
Is CSRS disability retirement federally taxable?
Some CSRS disability retirement is federally taxable.
An eligible recipient of CSRS disability retirement must:
- Have at least five years of creditable Federal civilian service to their name,
- Have a disability they incurred while they were employed in a job subject to CSRS and that prevents them from working that job,
- Have a qualifying disability expected to last a year or longer, and
- Have certification that their employer cannot accommodate them.
CSRS retirement disability recipients also must pay tax on their benefits.
Whether you are seeking CSRS or FERS retirement disability benefits, you have a limited amount of time to apply for them.
You also have to follow specific rules to maintain them. This can be overwhelming when you are trying to handle a disability.
An experienced federal employment disability lawyer can recover your benefits while you adjust to changes in your life.
Income Tax Rules from Your State Can Differ
While some of your disability retirement benefits might not be federally taxable, your benefits could be subject to state income taxes.
Contact an Attorney Today to Protect What Is Yours
It’s stressful to determine how much vital income you can keep when you’re receiving benefits for a debilitating condition. But you don’t have to figure this out on your own.
At the Federal Employment Law Firm of Aaron D. Wersing, PLLC, we have helped hundreds of federal employees with their employment issues.
We have substantial experience, and we are passionate about helping federal employees. Let us help you. Contact us online or call us at 866-508-2158 for a free consultation.