FERS TSP Lump Sum Withdrawal under CARES - NY Government exclusion?

[dchannam]

Hello,

Client under 59 1/2, still employed / working for DHS, under FERS plan.

Withdrew a lump sum of 130K from TSP account under CARES

$63k is Federal Taxable income using 3 year Qualified Disaster Distribution.

Does anyone have a reference or NY opinion reference on whether the full lump sum which is Federal taxable, is eligible for the NY Governmental pension exclusion from income.

(New York, TSP, COVID, CARES, FERS, NY Exclusion, Government )

I have located 3 NY opinions, but they do not specifically mention a working, non-retired, lump distribution, or CARES specifically, they do however state the FERS TSP is excludable to the extent included in Federal taxable income.

Thank you,

[qbteachmt]

"Withdrew a lump sum of 130K from TSP account under CARES"

But the CARES limit is $100,000.

"Only coronavirus-related distributions are eligible for the favorable tax treatment provided by the CARES Act. As defined by the Internal Revenue Service (IRS), a coronavirus-related distribution is “a distribution (withdrawal) that is made from an eligible retirement plan to a qualified individual from January 1, 2020, to December 30, 2020, up to an aggregate limit of $100,000 from all plans and IRAs.” That means $100,000 is the maximum amount across all your retirement plans combined that you can apply these tax advantages to. You must designate your withdrawal(s) as a coronavirus-related distribution when you file your taxes. To do that, you’ll file Form 8915-E."

https://www.tsp.gov/covid-19/withdrawals-and-repayments/

Did you search the web for NY?

https://www.wgcpas.com/new-york-state-addresses-personal-income-tax-conformity-with-cares-act/

"Coronavirus-related distributions from an eligible retirement plan will be allowed to be included in adjusted gross income over a three-year period."

https://www.tax.ny.gov/pit/cares-act-faq.htm

"New York State follows the federal treatment. The income will be included in New York adjusted gross income in the same year it is included in federal adjusted gross income."

[dchannam]

Hi,

NY allows an exemption of income for Federal Pension income to the extent included in Federal taxable income.  The NY treatment follows the CARES provisions, and these I understand. I want to ensure the NY code allows the government pension exemption for a lump sum withdrawal prior to the taxpayers exiting the employ of the DHS. 

I have searched and found three NY opinions, all of which refer directly to post retirement, normal distributions, but no specific mention of a lump sum withdrawal during employment and prior to age 59 1/2.

Thanks

[qbteachmt]

You have to pay attention to Dates. You read stuff on the web from March 2020 that no longer applies, for instance, because something else got passed in June 2020. Or Oct 2020.

The limit under CARES act disaster distribution, avoiding the 10% penalty and qualifying for the 3-year spread, has always been $100,000 max. That never changed.

You stated: "$63k is Federal Taxable income using 3 year Qualified Disaster Distribution."

But that's not how it works. $130k breaks out as:

$30k not qualified, subject to 10% Penalty and fully taxable for 2020 and does not go on the 8915-E.

$100k is treated as per CARES. The penalty would be waived and this would qualify to spread over 3-years.

[dchannam]

Yes, you are correct, I wasn't clear in my description.

2020 - $30,000 applies to FAGI and 10% Penalty

        - 33,333 applies to FAGI for 2020

        - 63,333 applies to FAGI for 2020, and 33,333 each for 2021, 2022

I'm looking to confirm if the 2020 FAGI of $63,333 can be excluded from NYSAGI as Pensions of the US Government on line 26 of IT-201 as a New York State resident. 

Normal distributions are qualified for the exemption as stated in TSB-A-15(6)I.

Thanks for taking time to reply and take interest.