View Full Version : Public employee - Deferred comp
pro2011
Jun 21, 2012, 07:31 AM
I recently found out that my deffered comp had been taxed for over 14 years. I recently withdrew my money at was taxed again. I was taxed - state, federal, school and local taxes for all those years. How do I go about recouping this tax money?
ebaines
Jun 21, 2012, 07:42 AM
If the deferred comp was originally taxed when it was credited to your account it's called "after tax money." Over the past 14 years the after-tax money has probably grown in value due to earnings of dividends and interest, and gains in the underlying investments - these earnings and growth have so far not been taxed. So when you make a withdrawal some of the withdrawal is indeed taxable, whereas the portion that represents the return of your original after-tax investment is not. So - are you sure that the taxes withheld are NOT on the earnings and growth? If you're sure there's a mistake then the problem lies with the plan administrator who issued the 1099-R form to document your withdrawal - the amount shown as a taxable withdrawal should reflect only the pretax portion of your contributions plus earnings and growth, but should not include the return of any after-tax contributions. I suggest that you contact the plan administrator and have them correct the 1099-R and reissue it. Assuming you have already filed your tax return including the 1099-R income, you would then file a corrected tax return (form 1040-X) to undo the tax on the return of your after-tax contribution.
pro20112
Jun 21, 2012, 09:36 AM
When I called the administrator to withdraw they told me they could not do anything about it and they withheld 20% of the total amount. i.e. - $1394 fed tax on $6974 (total contibution and dividends/interest). My past employer doesn't want to deal with it because they don't know what to do.
I contributed a set amount every year and it was taxed as mentioned(state, fed, local and school). My W2's never reflected my contribution until I questioned it the last year then it showed my contribution - so I was not taxed on that amount that year.
Over the course of the participation I made about $1200 from dividends/interest. I have not filed taxes on this yet since I only withdrew a month ago. I need to get this mess straightened out and figure what I need to do on my taxes. I have been taxed on the amount contributed since 1994 - minus 1 year when we noticed.
I did not have the administrator take out state tax on the withdraw since this is a mess.
ebaines
Jun 21, 2012, 09:45 AM
The good news is that you haven't really been taxed, at least not yet. Yes, they withheld some taxes - perhaps incorrectly - but you will get that back as a refund IF the 1099-R that the administrator will issue next January reflects the after-tax nature of the withdrawal. So the question is - does the administrator's records reflect that there was after-tax money in the account? If they say they believe it's all pretax money, then you will need to have your employer and the administrator get together to work it out. Your employer will have to to provide a statement documenting the split between pretax and after-tax contributions, and when each were made.