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Disability Retirement


The federal government allows employees who are unable to work to retire under a disability retirement. It is in the best interest of both employees and the federal government for employees to remain gainfully employed in their current grade or pay level, as long as they can provide useful and efficient service without endangering themselves, others or government property.
Disability retirement should be the very last option and should be used only when attempts have been made to preserve an individual's employment, and those attempts have failed.

Order our Disability Retirement guide to educate yourself on the rules and regulations concerning disability retirement for federal employees.

To read today's top news stories on federal employee pay, benefits, retirement, job rights and other workplace issues visit FederalDaily.com.
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teshia0406  
#1 Posted : Friday, January 15, 2010 11:08:16 AM(UTC)
teshia0406

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Joined: 1/15/2010(UTC)
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I just recently reviewed my 1099-R online for the disability retirement taxes that I received for the year 2009. I noticed in Box 7 that the code that they are using is Code 7-Normal Distribution. I feel like it should be a Code 3 -Disability since I am 33 years old and when out of work due to my doctors saying that I was totally disable. When I did my paperwork, it said Retirement Disability. I also have federal and tax states coming out of my check, and since it is marked as Code 7, I did not qualify for Earn Income Credit. The lady at the accounting office says, it should be a code 3, and then I would qualify for it. Do it need to be a code 3 or a code 7? Please help me understand.

Teshia McMillan

edalder  
#2 Posted : Friday, January 15, 2010 12:05:10 PM(UTC)
edalder

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Posts: 1,541

A CSRS or FERS disability retirement does not confer a finding that your are totally disabled for all gainful employment.  It is only a finding that you cannot do your most recent Federal job.

If you also receive SSDI, then you might have a case for a code 3 or for making the case to the IRS that you should be regarded as totally disabled.

I still don't think that you will qualify for the earned income credit.  You do not have earned income if your only income is your disability pension or your disability pension and SSDI. 

Kivi
postalwiz  
#3 Posted : Friday, January 15, 2010 5:52:41 PM(UTC)
postalwiz

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Careful what you ask for.  Disability Retirement under OPM is fully taxable but if you applied for disability
and were granted disability retirement; your 1099 should reflect that. SS has different rules.  If you did not apply for disability retirement but went out on optional retirement even thou it may had been for your health your 1099R will show it as a regular retirement and then some of your annuity is tax exempt,
based on when you retired and the amounts of contributions to the retirement system.  At age 62
if on disability retirement the IRS considers you as being on regular retirement and you can start
claiming some of your retirement as tax exempt using the same formula as explained above. You
are only 33 so it seems that yo went out on disability and the 1099R should reflect that.  As for
the earned credit question; you really should go to someone who knows IRS rules.  I am very
surprised that someone at OPM would have made such a statement.  You can also go into the IRS
Web-Site and contact them.
postalwiz2010-01-16 02:01:18
Angel1955  
#4 Posted : Monday, January 25, 2010 8:48:17 AM(UTC)
Angel1955

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Hm - I am over 65 0 still working CSRS - will have 40 years in a few months - I was offered disability twice - did not accept as I could not raise a family on it - I always thought that if you had the standard time/age in to retire that you could not go out on disability?? - I was recently off on FMLA for a few months - when I came back they had moved me to a weather controlled office - but there is no handicapped bathroom - I am getting tired of having to fight for such things - - 
oktoots  
#5 Posted : Monday, January 25, 2010 9:05:31 AM(UTC)
oktoots

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Posts: 2,485

Correct, angel, at 73 years of age and 40 yrs in you cannot go out on disability. What would be your question then? 
multiple identities to 0%
postalwiz  
#6 Posted : Monday, January 25, 2010 5:57:07 PM(UTC)
postalwiz

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There would be no advantage going out on disability.  Your benefit would be the same; after 21 years and
11 months of service the computation is the same and with 40 years of service your % of annuity
is 76% of your high 3; at 41 years and 11 months is 80% and the maximum % you will receive except
for any sick leave you have accumulated at the time of retirement.  If you are health wise that bad
are you sure you cannot retire? ask for a retirement print-out; it may be to your advantage to
retire with that many years of service after you take into consideration the tax bracket you are on
now vs. the tax bracket you may fall under after retirement.Smile
Angel1955  
#7 Posted : Tuesday, January 26, 2010 10:16:03 AM(UTC)
Angel1955

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Joined: 11/7/2009(UTC)
Posts: 448

I feel stuck right now - I was tentatively moved to a nice area - however there is no handicapped bathroom and there is no intent on putting one in.  There is one at the other end of the bldg.
Or do I stay where I am, comfortable desk, handicapped bathroom etc.  but soo noisy and not temp. regulated. 

postalwiz  
#8 Posted : Tuesday, January 26, 2010 2:57:28 PM(UTC)
postalwiz

Rank: Senior Member

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Joined: 11/28/2006(UTC)
Posts: 3,272

If you went out on a disability retirement approved by OPM your code in your 1099R should be Code 3
Disability which is fully taxable.  Contact OPM and clarify your code in your 1099R and get a copy
of IRS Publication 721 to give you more guidance on the issue of taxes and disability retirement and make sure you check your last form 50 and that the NOA they separated you under shows disability retirement which I believe is 302/
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