Are You Ready for the New Federal Income Tax Form?
The number of various major changes under the new tax law may make your 2018 federal income tax return unlike anything you’ve seen in the past. The first proper steps can help you fight anxiety and tackle your taxes. The earliest IRS will accept returns is Jan 28, seeing as the deadline is April 15.
Pick up a copy of last year’s tax return. The tax rules have dramatically changed, and there’s a 1040 form with a new look. The old return for the 2017 tax year can be a road map for making sure you have gathered all the paperwork you need to file your 2018 tax return.
An old 1040 may remind you that you don’t have a 1099-INT from a bank account or the latest 1099-DIV from a mutual fund to report dividends and capital gains.
Find valid social security numbers; IDs ensure that you have the accurate social security numbers for you, your spouse and your children as well. If you had a baby in 2018, you would need the newborn’s social security number for your tax return. Some tax preparers for some form of identification to prove who you say you are. You can make it a point of carrying your drivers license or state identification number. In addition, some states will reject an e file on a state return if you don’t submit information from a state ID or driver’s license.
See if you can file for free. The IRS site offers a program that allows taxpayers access to brand-name tax products, free of charge, to prepare a federal tax return and file it for free, depending on their income. The program has reportedly been made more consumer-friendly to chop off some outside marketing efforts. H&R Block also offers its free file program via the IRS site to those between the ages of 17 and 51 and with an adjusted gross income of $66,000. In addition, H&R Block offers free file of a state return if you qualify for the federal return.
Take time to review a checklist. You might receive a checklist via email or in the mail if you are working with a tax professional. Sites such as H&R Block also provide a checklist that can easily be used by anyone to help them figure out what information they need to complete a tax return. If you currently reside in the United States and need a replacement form SSA-1099 or SSA1042S, the Social Security Administration (SSA) allows you to go online and get an instant, printable replacement form with a My Social Security account.
Know your bank account. If you would like your tax refund directly deposited into your account, it would be wise to triple-check your routing number and bank account number. A lot of tension can be avoided if you make sure to key in the correct number.
It may be possible to make the correction to your bank information before e-filing your tax return again. That is if the IRS rejects your return. By using direct deposit, you would get your refund faster. Additionally, direct deposit also helps avoid the chance of a tax refund check getting lost or returned to IRS because the post office said it could not be delivered. The IRS emphasizes to taxpayer’s that they should only deposit refunds directly to accounts that are their own; in their name, their spouse’s name, or both if it’s a joint account.
Difference between CSRS and FERS
TSP CSRS, or the Civil Service Retirement System, offers the Thrift Savings Plan as a supplement to your CSRS Annuity or military pay- as of January 1st, 2018, military employees also participate in a military TSP.
TSP and FERS, or Federal Employees’ Retirement System, makes your TSP one part of a three-part retirement plan. This also includes the FERS Basic Annuity and Social Security.
The difference between the FERS or CSRS Annuity and the TSP is that the annuity is based on your years of service, rather than how much you have contributed, and is also voluntary, as opposed to the annuity.
Regardless of which retirement system you qualify for, contributing to the Thrift Savings Plan is vital to your retirement, especially if you contribute early. TSP compound interest means that the earlier you start to make contributions, the better. However, if you did not start saving at an earlier point, committing to a steady and consistent contribution schedule will almost always produce positive results.
How does TSP work?
If you are a new federal employee, you most likely have an established account and were enrolled in a 3% payroll deduction. If you were hired before July 31st, 2010, you were not automatically enrolled in a TSP account and will need to create it yourself. For CSRS employees and members of the uniformed services, you must elect to contribute to the TSP. You are also not eligible for agency contributions.
You can elect to stop or change your contributions at any time. Check with your payroll office or agency to find out how to sign up for TSP. You may be required to use your agency or service’s electronic system, or you may have to submit Form TSP-1 (Form TSP-U-1 for uniformed services). The Thrift Savings Plan website has the forms available if your agency or service accepts them.
TSP funds
There are five core funds in the Thrift Savings Plan- four of them are index funds, which mean that they are exactly matched to a broad market index.
- G Fund (Government Securities Investment Fund)
- This fund does not invest in an index. The only fund that it is connected to is a nonmarketable treasury security issued for the TSP by the U.S. Lowest return and risk
- F Fund (Fixed Income Investment Index Fund)
- Matches the Barclays Capital U.S. Aggregate Bond Index. Slightly higher return and slightly higher risk.
- C Fund (Common Stock Index Investment Fund)
- Out of the three stock funds in the TSP, the C is considered the most conservative. It is connected to the Standard and Poor’s 500 Index, which has greater volatility than either the G or F funds.
- S Fund (Small Capitalization Stock Index Fund)
- This fund is connected to the Dow Jones U.S. Completion Total Stock Market Index, which is a total of 4,500 companies that fall outside of the S&P 500’s list. Potential for large growth, but also large losses.
- I Fund (International Stock Investment Fund)
- The only internationally invested fund. High risk, but potentially high reward.
There is another option for Thrift Savings Plan investment funds- the L funds. These are funds that actually invest in a variety of all the other funds and target a specific retirement date, initially investing in the more aggressive funds and slowly moving into the more stable bonds funds as retirement approaches.
How to change my TSP contribution
If you have not made a contribution election through your agency to start contributions or change the way your contributions work, there are a few steps:
- Ask your personnel or benefits office whether your agency or service handles enrollments
- Determine the amount you want to contribute and whether you want a Roth or Traditional TSP
- Return your completed TSP-1 or TSP-U-1 to your employer to get your payroll deductions set up. Your election should be effective no later than the first full pay period after your agency or service receives it.
Withdrawing from the TSP
You have several withdrawal options that you can choose from. Partial withdrawals are allowed in a single payment. You can also make a full withdrawal with any one or any combination of the following methods:
- A single (lump sum) payment
- A series of monthly payments
- A life annuity (Thrift Savings Plan Lifetime payment options).
A combination of any of these three full withdrawal options is called a “mixed withdrawal.” You can have the Thrift Savings Plan transfer all or part of any single payment or, in some cases, a series of monthly payments, to a traditional IRA or an eligible employer plan by completing the TSP-70 form. Payments to you can be deposited directly into your checking or savings account using electronic funds transfer (EFT).
Spouse’s Rights
If you are a married Thrift Savings Plan participant (even if you are separated from your spouse), spouses’ rights apply to annuity purchases. If you are a married FERS or uniformed services participant with a total account balance of more than $3,500 and you are making a full withdrawal of your account, your spouse is entitled by law to an annuity with a 50% survivor benefit, level payments, and no cash refund. If you choose any other withdrawal option or combination of options by which your entire account balance is not used to purchase this particular type of annuity, your spouse must sign the statement on your withdrawal form that waives his or her right to that annuity.
