Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Author: goody14 Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121564  
Subject: TSP/401K Lump Sum Question Date: 2/11/2006 5:36 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
To my understanding, as of January 2006, the Government has removed all monthly contribution limits on the federal 401k or "Thrift Savings Plan." Apparently, my entire biweekly paycheck, up to an annual total of $15,000, can be deposited. There is also a provision allowing for lump sum deposits. If I understand correctly, I can either put in the monthly pretax contributions or do one or a number of lump sum deposits. If I were to choose the lump sum route, which would assumingly come from after tax monies, is there any way of making back that money that was taxed? The way I see it, seeing of how the benefit of the TSP/401k/Traditional IRA is that contributions are pretax, shouldn't there be some way of making the aftertax lump sum payments have the same benefit? Is there a way to account for this on my tax return?

thanks in advance
goody14
Print the post Back To Top
Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 83815 of 121564
Subject: Re: TSP/401K Lump Sum Question Date: 2/11/2006 9:33 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
To my understanding, as of January 2006, the Government has removed all monthly contribution limits on the federal 401k or "Thrift Savings Plan." Apparently, my entire biweekly paycheck, up to an annual total of $15,000, can be deposited. There is also a provision allowing for lump sum deposits. If I understand correctly, I can either put in the monthly pretax contributions or do one or a number of lump sum deposits. If I were to choose the lump sum route, which would assumingly come from after tax monies, is there any way of making back that money that was taxed? The way I see it, seeing of how the benefit of the TSP/401k/Traditional IRA is that contributions are pretax, shouldn't there be some way of making the aftertax lump sum payments have the same benefit? Is there a way to account for this on my tax return?

You'll have to ask your payroll department. My guess is that you'll get the excess tax withholdings back when you file your tax return. Your W-2 will show a smaller amount in Box 1. I'm less certain how you'll get back any excess SS withholdings. (I don't remember the procedure when a single employer overwithholds FICA).

Ira

Print the post Back To Top
Author: rosewine Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 83816 of 121564
Subject: Re: TSP/401K Lump Sum Question Date: 2/11/2006 10:28 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
(I don't remember the procedure when a single employer overwithholds FICA).

If a single employer overwithholds FICA, that employer must make the correction. It doesn't happen on the employees tax return. However, if the max that can go into the 401K is $15,000 that's a long way from the $90,000 or so max on Social Security.

Also, if I'm not mistaken, FICA is owed on the money that is going into the 401K.


Print the post Back To Top
Author: goody14 Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 83817 of 121564
Subject: Re: TSP/401K Lump Sum Question Date: 2/11/2006 11:45 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
The interesting part is that I am currently deployed to the Persian Gulf. That being said, the monthly contributions will be tax free as per the TSP provisions and when the account is liquidated, the proceeds will also be free of capital gains taxes as per the combat zone tax exclusion provisions. As far as I can tell, this is essentially a combination of the best parts of the Traditional and Roth IRAs. The essential part of my question is whether its possible to regain the pretax contribution benefit if and when I make a lump sum contribution using post tax dollars (can I get that taxed money back?)

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Advertisement