Annual Leave, Taxes and Death

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fish8me
Posts: 14
Joined: Thu Jan 07, 2016 10:36 am

Annual Leave, Taxes and Death

Post by fish8me »

I’m getting off the bus at the end of this year. As it stands right now, I have over 550 hours that I am looking to sell back since my HR stated to me that ALL hours in excess of the 448 can be sold. As from reading all the recent retirees from the FERSGUIDE newsletter and the Christ Barfield newsletter, I will be taxes heavily on this annual leave payment…(22% tax bracket, 1.45% Medicare, 6.2% Social Security SS)

I understand that I can opt to retire this years (November 2020) after I reach my maximum require SS contributions ($8,537.40) and should receive my leave payment this year, 2020 and not have the 6.2% taken out. Nevertheless, it’s earn income for 2020. I’m mentally preparing myself for 2021 as the start of a new chapter…So I’m leaning with the bus stop on the 31st.

How will (and IF) the IRS compensate me on my 2021 filling??? Should I received credit for this 2020 payment since I’ll be in a lower tax bracket next year? Should I over pay my 2020 HSA??? (Already maxed to the IRS 2020 limit.

Has anyone explored this issue or have any ideas on how to avoid/lessen these taxes…. (Not death… I know there no way around that one)..

jdeacon
Posts: 136
Joined: Fri Mar 05, 2010 4:38 pm

Re: Annual Leave, Taxes and Death

Post by jdeacon »

Why do you just not take your leave like I am doing? I could retire in november and take cash for my leave but instead chose to take leave and get paid in december 2020 , January and February 2021. The advantages include: accrue leave for 3 additional months, can make roth contributions to my tsp in 2021, get credit for 3 federal holidays and max out FSA for 2021 but only pay for two months of it. I must spent the roughly $2,600 FSA during the months of January and February but I only pay 1/6th of that amount.

jdeacon
Posts: 136
Joined: Fri Mar 05, 2010 4:38 pm

Re: Annual Leave, Taxes and Death

Post by jdeacon »

I might add it also adds 3 month to your longevity which equates to about .25% increase in retirement pay (granted not much but it adds up over time)

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mhende2
Posts: 70
Joined: Wed Oct 12, 2016 12:32 pm

Re: Annual Leave, Taxes and Death

Post by mhende2 »

What's with the statement you can sell back what's in excess of 448 hrs? You talking sick leave or annual leave?
Last edited by mhende2 on Tue Oct 06, 2020 8:06 pm, edited 1 time in total.
In investing, what is comfortable is rarely profitable.
-Robert Arnott

jdeacon
Posts: 136
Joined: Fri Mar 05, 2010 4:38 pm

Re: Annual Leave, Taxes and Death

Post by jdeacon »

I know of no restrictions in the selling back of annual leave other that the annual use or lose provisions which limit how much you can accrue and carry forward.

fish8me
Posts: 14
Joined: Thu Jan 07, 2016 10:36 am

Re: Annual Leave, Taxes and Death

Post by fish8me »

Thanks for your input JDecon...Are you taking 3 months worth of leave? (Dec, Jan, and Feb?)
If my agency would allowed me to take 3 months worth of leave (but they won't) I would have to take all of my 240 hours on Use-or-Loose before the end of 12/31/2020. Meaning I would have to be on leave as I write this post on this forum...I can carry the other 240 to 2021 but I'm not seeing the financial gain by doing what you mentioned above...

I have 550 hours that will get paid for, but it will be taxed heavily once its sent to me after retirement in Jan 2021. I don't like that bus stop...

ProduceMan
Posts: 545
Joined: Thu Jan 18, 2018 12:01 pm

Re: Annual Leave, Taxes and Death

Post by ProduceMan »

fish8me wrote:I’m getting off the bus at the end of this year. As it stands right now, I have over 550 hours that I am looking to sell back since my HR stated to me that ALL hours in excess of the 448 can be sold. As from reading all the recent retirees from the FERSGUIDE newsletter and the Christ Barfield newsletter, I will be taxes heavily on this annual leave payment…(22% tax bracket, 1.45% Medicare, 6.2% Social Security SS) .
I am not familiar with the “ALL hours in excess of the 448 can be sold” rule.
Moneys’ Money Making Money (4M)

jdeacon
Posts: 136
Joined: Fri Mar 05, 2010 4:38 pm

Re: Annual Leave, Taxes and Death

Post by jdeacon »

I am taking one week of leave in November, 2 weeks in December, signing out in early January and continuing my annual leave through the end of February. My organization has no problem with this arrangement.

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mhende2
Posts: 70
Joined: Wed Oct 12, 2016 12:32 pm

Re: Annual Leave, Taxes and Death

Post by mhende2 »

We all have different reasons and plans. I check out 31 Dec, selling 408 hrs annual, and credit for 4 months sick leave (696hrs). The pay for annual leave will be taxed as 2021 income but our overall taxable income will be much less. My wife, not working, can start drawing her Pera retirement in April (one of the drawbacks of wife 7 years younger) so the added funds from leave sale will help bridge that gap until April. Just hope to keep compounding all our investments over the next 6 years until mandatory withdrawls start for me at 72. I've been blessed with a long enjoyable career plus supportive family and great friends. Travel trailer, canoe, and fishing pole are ready to go along with many other hobbies and I cherish helping out my daughter and son in law on their ranch when they need some help. Good luck to all, and I thank all of you for sharing your thoughts and advice with the rest of us. I learned a lot and still anxious to learn more.
In investing, what is comfortable is rarely profitable.
-Robert Arnott

omoade
Posts: 11
Joined: Fri Jan 02, 2015 10:13 am

Re: Annual Leave, Taxes and Death

Post by omoade »

550? 448? So, how do you all get more than the maximum 240 to sell back? Sound like a function of the specific date one picks to get off the bus? If yes, what would be the best date to earn the 448 or 550?

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12squared
Posts: 486
Joined: Thu Dec 31, 2015 7:28 am

Re: Annual Leave, Taxes and Death

Post by 12squared »

omoade wrote:550? 448? So, how do you all get more than the maximum 240 to sell back? Sound like a function of the specific date one picks to get off the bus? If yes, what would be the best date to earn the 448 or 550?
240 hrs (carryover) + 8 hrs per pay period * 26 pay periods = 448 hours in the last week of December. With that many hours, you could take leave from this Friday through the end of the CY.
“The genius of investing is recognizing the direction of the trend — not catching the highs or the lows.”
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ProduceMan
Posts: 545
Joined: Thu Jan 18, 2018 12:01 pm

Re: Annual Leave, Taxes and Death

Post by ProduceMan »

ProduceMan wrote:
fish8me wrote:I’m getting off the bus at the end of this year. As it stands right now, I have over 550 hours that I am looking to sell back since my HR stated to me that ALL hours in excess of the 448 can be sold .
I am not familiar with the “ALL hours in excess of the 448 can be sold” rule.
Moneys’ Money Making Money (4M)

fish8me
Posts: 14
Joined: Thu Jan 07, 2016 10:36 am

Re: Annual Leave, Taxes and Death

Post by fish8me »

ProduceMan, I had always been under the impression that 448 was the maximum you could sell back. After several emails with my agency HR, I'm being told that ALL hours in excess of 448 can be sold. So my plan is to sell ALL 550 hours on 12/31/2020..

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mhende2
Posts: 70
Joined: Wed Oct 12, 2016 12:32 pm

Re: Annual Leave, Taxes and Death

Post by mhende2 »

Maybe this will help all of us.

Unused Annual Leave Payout at Retirement

https://www.fedweek.com/reg-jones-exper ... etirement/
Last edited by mhende2 on Wed Oct 07, 2020 2:06 pm, edited 2 times in total.
In investing, what is comfortable is rarely profitable.
-Robert Arnott

ProduceMan
Posts: 545
Joined: Thu Jan 18, 2018 12:01 pm

Re: Annual Leave, Taxes and Death

Post by ProduceMan »

fish8me wrote:ProduceMan, I had always been under the impression that 448 was the maximum you could sell back. After several emails with my agency HR, I'm being told that ALL hours in excess of 448 can be sold. So my plan is to sell ALL 550 hours on 12/31/2020..
I know your plan is to sell ALL 550, but you said your HR emails are informing you ALL hours in excess of 448 can be sold. With that being said, I am interpreting that as only hours in excess of 448 (448.01 - 550.00 example for your situation), can be sold.
Moneys’ Money Making Money (4M)

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