Government Retiree Credit

[FEDUKE404]

It's the WORK - not the PENSION

... 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....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.

The way I read the rule is that the underlying service, as an employee, must have been covered by FICA. Not the pension, which I have never heard of either, but the original work which eventually lead to the retirement pension.

Certainly many (most?) people who are receiving government pensions are also receiving Social Security benefits, or at least for early retirees will do so when they reach age 62-66. That puts this credit somewhat in the same general "so what?" category of the infamous Schedule R.

OTOH, there are some government (state) employees whose wages are/were not subject to FICA withholding over the years. The decision not to participate in the Social Security system was made by the government entity involved. I am assuming those are the people being referenced by the restriction.

And to answer somewhat your question, I personally am receiving a government pension and I did pay Social Security as required on my own wages which I earned over the years. Therefore I should not be eligible to claim the "government retiree credit."

I also agree with your statement (" I have never seen a government pension that was covered by FICA") but I do not believe that is the fundamental issue at hand.

FE

[Mike Mac]

Fed Retirement System

Federal government employees who were hired before Jan 1, 1987 were in what is known as the CSRS pensions system and they did NOT contribute to Social Security. Those hired after 1/1/87 went under a system known as FERS and do contribute to the social security pension system. Most present federal retirees were likely under the former system. If they didn't qualify for a social security pension from some non-federal employment they did not get a $250 check from SSN but do qualify for a $250 reduction in taxes when they file their Schedule M for 2009.

I too spent much time trying to figure out who got checks for what amount and who qualifies for the various elements of the credit. Much of the logic finally clicked in my mind when I just sat down and ran some scenarios through Schedule M and saw what the results were.

[FEDUKE404]

Use your Schedule M, Luke!

...I too spent much time trying to figure out who got checks for what amount and who qualifies for the various elements of the credit. Much of the logic finally clicked in my mind when I just sat down and ran some scenarios through Schedule M and saw what the results were.

Agreed - Schedule M looks as if its main purpose is to keep people from double/triple dipping on the Obama credits. Rest assured there are plenty of people who already got their money in a reduction in federal withholding from their wage income and are also receiving Social Security benefits so that they also received the $250 check in the mail.

So what happens if a person paid into Social Security (2nd job or one prior/later to government job) and also did NOT pay into the SS system for the government job itself?

It's gonna be a fun tax season!

FE

[AJsTax]

Exactly the situation

Ag
So what happens if a person paid into Social Security (2nd job or one prior/later to government job) and also did NOT pay into the SS system for the government job itself?
FE

I was referring to. A family member receives a state pension that had no payments into the SS system so that it qualifies for the credit. This person receives SS benefits also on other qualifications and received the check. So the check received for the SS benefits wipes out the credit on Sch M BUT their withholding was reduced to correspond with the credit so without adjusted withholding they will owe.

This is going to fun just identifying all those that received the SS payment last spring and trying to tie that to the schedule with other income.
Every time they do something like this makes more work for us. So many more questions for clients that get what they did 3 years ago confused with this year already!!

[FEDUKE404]

Finding the missing numbers

... This person receives SS benefits also on other qualifications and received the check. So the check received for the SS benefits wipes out the credit on Sch M BUT their withholding was reduced to correspond with the credit so without adjusted withholding they will owe.

This is going to fun just identifying all those that received the SS payment last spring

Exactly! In the situation you mentioned, de minimis the person gets a "smaller" refund via Sch M calculations.

Hopefully the Social Security Form SSA-1099 for 2009 will show something about the $250. And it is my understanding that the $250 freebie is not included in overall 2009 Social Security benefits for the recipient.

Aside from that, perhaps there will be an IRS web site/800 number as before to get the information for those "I don't remember gettin' nuttin" folks.

FE

[dyne]

The schedule M allows NO net credit if the taxpayer received the $250 Economic Benefit
payment and DID qualify for the Certain Goverement Retiree credit and had NO earned
income. So the government retiree credit is eliminated by the receipt of the $250
Economic Benefit payment.
If the taxpayer had earned income sufficient to get the $400 maximum credit and
DID receive the $250 Economic Benefit Payment and DID qualify for the Certain
Goverment Retiree credit, the net credit allowed is $150. .

[Mike Mac]

Website that shows $250 payment

An IRS website that would show if someone got a $250 payment (similar to the Economic
Recovery setup) was discussed at a class I attended. The IRS representative was doubtful that the IRS would set one up (mainly because the IRS did not send out the checks nor do they own the data). But then he said something curious. He thought that there would be an error checking routine that would reject the electronically filed return if the Schedule M was wrong. That would mean that the IRS would have real-time access to the original data (so why wouldn't they share it with us to avoid the errors in the 1st place).