February 4, 2011

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act was passed by the United States Congress on 12/16/10 and signed into law on 12/17/10.  As a result, the Internal Revenue Service (IRS) published the tax withholding tables later than usual for 2011.

The Making Work Pay tax credit expired 12/31/2010.  As a result, according to the Office of Personnel Management (OPM), many federal retirees may see an increase in the amount of federal tax being withheld from their monthly annuity payments. The tax withholding tables published by the IRS were adjusted to provide for the correct withholding amounts without this credit.

OPM applied the tax tables as quickly as possible but there was not enough time to apply these tables to the 1/3/2011 annuity payments, according to OPM.

The withholding changes affect the 2/1/2011 and subsequent annuity payments.

OPM has no control over the tax withholding tables, it said in a statement on Feb. 4.  "[W]e used the tables provided by the IRS, which are set in law by the United States Congress. Annuitants can instruct OPM to lower their tax withholding, but the annuitants are ultimately responsible to ensure their tax burden is met," OPM stated.

More information is now available on the OPM website at: http://www.opm.gov/retire/annuity/announcements/index.asp

OPM has an online calculator which annuitants can use to estimate the amount of federal tax withholding.   Annuitants can make these changes by using their OPM-provided password at http://www.servicesonline.opm.gov.

Annuitants may instruct OPM to change their tax withholding by calling the OPM Retirement Information Office at 1-888-767-6738.

For information regarding federal income tax, annuitants can visit the IRS website at http://www.irs.gov or call 1-800-829-1040.

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