Income Tax on Refunds
Your refund may be subject to income tax.
- If the taxable portion of your refund is $200 or more, the IRS requires PEERS to withhold 20% for federal taxes.
- You may also incur an additional 10% tax penalty if you are under age 59½ at the time of the refund.
- This penalty generally does not apply if you separate from service in, or after, the tax year in which you reach age 55.
- You may also incur a state tax liability on your refund.
- You can defer taxes and eliminate the federal 10% penalty if you choose a direct rollover of your funds to an Individual Retirement Account (IRA) or other eligible retirement plan.
- If you turn age 70-1/2 before or during the tax year of your refund payment, PEERS will calculate the IRS Required Minimum Distribution (RMB) payment as required by the IRS, and make this payment directly to you.
If you request a Refund Application, detailed tax information and payment options will accompany the form.
PEERS does not answer individual tax questions or give tax advice.
Inquiries should be referred to a tax professional or to the appropriate state or federal taxing agency.
You might also be interested in ...
- How to apply for a refund
- View your PEERS contributions and interest
- Learning about the consequences of taking a refund when you are vested