Government Retiree Credit

[origun]

I know the Government Retiree Credit is for fed, state and local retirees who don't receive Social Security. What about a state retiree who did contribute to Social Security but is not yet of age to collect? For example, in our state PERS retiree might retire at 55 but, of course, cannot begin collecting SS until at least 62. Will he/she be eligible for the $250 Govt Retiree credit for 2009 since he/she didn't receive the $250 SS credit... although he/she would have contributed to FICA while working?

[dyne]

My understanding is that a taxpayer who was COVERED by social security will NOT
be entitled to the $250 government retiree credit. This credit is for those taxpayers
who worked their entire career for the government, etc. and never worked where FICA
was withheld or SE tax was paid. I anticipate seeing very few if any such clients.

[origun]

It will depend on the state as to how many we have. In Oregon, state employees contribute to FICA for their entire career and many retire after 30 years of service (in early 50's sometimes) and have to wait 10 or more years to collect Social Security. I have several such clients (and was in that situation myself...before I became so ancient and could collect SS!). I have been told unofficially in an update class (not by IRS) that they would be able to collect the $250 when they file...but am trying to get an official answer. If I find out more, I will post.

[Nashville]

Forever is a Long, Long Time

and never worked where FICA was withheld or SE tax was paid.

Focus on the "never" in Dyne's statement. I interpret this to mean if a govt worker worked at McDonald's when he was 17 and had FICA withheld then he is ineligible for this credit. Or if he has never had FICA withheld and files a joint return do both spouses have to be "never" people?

I have government people, but surely none who fall into this "never" category. I'm not trying to discredit Dyne's post, but want to make sure I understand just what is meant, or if there is some "wiggle room" in the govt's intent.

[dyne]

I am afraid that I was WRONG in my post where I said...never worked where FICA was
withheld or SE tax paid. That opens the door wider for clients who could qualify. Sorry.
This schedule M is going to cause much confusion.

[Jesse]

Government Retiree Credit is for fed, state and local retirees who are currently retired and don't receive Social Security, correct?

For example, a retired postal worker or a retired teacher that does not collect social security would be eligible for the $250. But if they are also employed the making work pay credit is also calculated and the two credits together cannot exceed $400 ($800 MFJ).

[origun]

I am an EA with H&RBlock so I submitted my question to their Tax Institute and this was the response I just received: (I have found the quality of their answers to be good in the past.)

Eligible individuals are allowed a $250 credit against income tax (the “credit for government retirees”) for the first tax year beginning in 2009. (Sec. 2202(a), PL 111-5, 2/17/2009). An “eligible individual” is any individual who, during the first tax year beginning in 2009: (1) receives any amount as a pension or annuity for service
performed in the employ of the U.S. or any state, or any instrumentality thereof, that isn't considered employment for purposes of the Federal Insurance Contributions Act (FICA), and (2) doesn't receive an economic recovery payment under Sec. 2201 of the 2009 Recovery Act (Sec. 2201, PL 111-5, 2/17/2009), which provides for $250 payments to recipients of social security, supplemental security income (SSI), railroad
retirement, or veterans disability or pension benefits. (Sec. 2202(b)(1), PL 111-5, 2/17/2009). Thus, the credit is allowed for individuals who receive a government pension or annuity from work not covered by social security
and who aren't eligible to receive an economic recovery payment. From the facts provided, the taxpayer was covered under FICA during their employee with the state government and is therefore not eligible for the credit available to government retirees.

[AJsTax]

Credits

If a taxpayer is receiving a government pension they are eligible for the $250 tax credit. If they also received the $250 stimulus payment for SS retirees (yes that is possible) the amount of the credit is reduced by the amount of the stimulus payment received. No double dipping.
If a retiree that is receiving social security went back to work and also has w-2 income they are eligible for the $400 credit, but that will be reduced by any stimulus money they already received. Thus they may be eligible for a $150 credit on top of their $250 stimulus check already received.

It really is not very confusing if you think of it along the line that nearly everyone is eligible for something, those working will be a max of $400 and retirees a max of $250 even if they have all three sources of income.

[origun]

I'm not sure everybody is entitled to something. If you collecting a state pension (age 60, for example) who contributed to FICA while working for the state and you not currently employed, my understanding is that you get nothing.
--Not Making Work Pay as you aren't employed.
--Not Economic Recovery Payment as you aren't collecting SS, VA, RR, SSI
--Not Government Retiree Credit as you aren't collecting a government pension from work that wasn't covered by FICA.

Am I missing something?

[newbie]

I'm not sure everybody is entitled to something. If you collecting a state pension (age 60, for example) who contributed to FICA while working for the state and you not currently employed, my understanding is that you get nothing.
--Not Making Work Pay as you aren't employed.
--Not Economic Recovery Payment as you aren't collecting SS, VA, RR, SSI
--Not Government Retiree Credit as you aren't collecting a government pension from work that wasn't covered by FICA.

Am I missing something?

http://www.irs.gov/formspubs/article/0,,id=207441,00.html

Government retiree credit. You can take this credit if you receive a pension or annuity payment in 2009 for service performed for the U.S. Government or any U.S. state or local government (or any instrumentality of one or more of these) and the service was not covered by social security.
.
So that sounds right, a retired teacher collecting a state pension would not be eligible for the $250 credit if not collecting SS, VA, RR, SSI. If they are receiving wages or SE income they would be eligible for up to $400 making work pay credit.

[dyne]

IRS.GOV says that the Making Work Pay Credit of up to $400 or $800 is REDUCED by the Certain Government Retiree Credit of $250 (or $500 if both spouses so qualify) AND the economic Benefit payment of $250 or $500. The Certain Government Retiree Credit is a NEGATIVE factor in the top portion of schedule M in this regard.
But the Certain Government Retiree Credit of $250 can be a POSITIVE credit reflected at the bottom of schedule M when certain events occur such as when there was NO earned income and NO Economic Benefit payment received. I discovered this be inserting date into my tax software to calculate a schedule M. I was trying to come up with a GENERAL RULE to explain the schedule M but cannot.

[newbie]

IRS.GOV says that the Making Work Pay Credit of up to $400 or $800 is REDUCED by the Certain Government Retiree Credit of $250 (or $500 if both spouses so qualify) AND the economic Benefit payment of $250 or $500. The Certain Government Retiree Credit is a NEGATIVE factor in the top portion of schedule M in this regard.
But the Certain Government Retiree Credit of $250 can be a POSITIVE credit reflected at the bottom of schedule M when certain events occur such as when there was NO earned income and NO Economic Benefit payment received. I discovered this be inserting date into my tax software to calculate a schedule M. I was trying to come up with a GENERAL RULE to explain the schedule M but cannot.

I think I have it figured out, but correct me if not.

You can't get both the $250 Government Retiree Credit and the $400 Making Work Pay Credit for a total of $650.

So if you received the $250 this would be a reduction from the $400 and you could get another $150 Making Work Pay Credit for a total of $400.(Double for MFJ).

The positive credit on the bottom would occur only if the government retiree did not receive the $250, such as a retired postmaster who does not collect social security or any other source so that they would not have received the $250 automatically. However the $400 max would still apply, so if you receive $400 you will not receive another $250, the combination of the two can only me a max of $400.(Double for MFJ).

[dyne]

A General Rule is that to qualify for a credit on line 14 of schedule M a taxpayer MUST have either earned income or be a certain government retiree. This agrees with the HEADING at the top of schedule M. This eliminates the credit for many taxpayers. It also simplifies the issue for me. Agree?

[FEDUKE404]

Credit based on work COVERED by Soc Sec

Now I am really confused.

The way I read it ("Government retiree credit. You can take this credit if you receive a pension or annuity payment in 2009 for service performed for the U.S. Government or any U.S. state or local government ... and the service was not covered by social security.")

Although I certainly don't know the rules for all state/local governments, is it not true that the prior employment of most government employees (retirees) has been covered by FICA withholding? (Yes, there are some exceptions as noted by others.) If so, there will be very few individuals who can benefit from this specific credit.

Those who are apparently interpreting this credit as allowable to a government retiree who is merely not yet receiving Social Security benefits seem, at least to me, to be in error.

I guess the government's logic (!) is that if you are receiving Social Security, you already got that $250 freebie. If you are a government retiree who is/will NOT be receiving Social Security related to that service, here is a bone. And then if you could qualify for the government retiree credit, you cannot use/receive both.

FE

[AJsTax]

I believe the opposite

Now I am really confused.

Although I certainly don't know the rules for all state/local governments, is it not true that the prior employment of most government employees (retirees) has been covered by FICA withholding? (Yes, there are some exceptions as noted by others.) If so, there will be very few individuals who can benefit from this specific credit.

Those who are apparently interpreting this credit as allowable to a government retiree who is merely not yet receiving Social Security benefits seem, at least to me, to be in error.

FE

to be true. In my few years of being a tax preparer (only 15) I have never seen a government pension that was covered by FICA. I am not sure how you could get a government pension if you were covered by social security. There are several members of my immediate family that have or are paying into government pensions, state and local, and none involve social security.
There are situations were a person can qualify for both the payment and the credit. I have the situation that the taxpayer is receiving the survivor rights of a state pension from her deceased spouse, on her own she is receiving the social security and did receive the payment. Then her withholding was reduced on the pension automatically to make up for the credit when the tables were changed. We had to send in a new W-4p because she received the $250 from Social Security and that replaces the credit for the pension.

If anyone knows of a government pension that also paid into FICA I would be interested of knowing of that situation. At this point I do not know of any.