Year of FERS Income for Social Security Pension

[TLuke]

I retired from FERS effective 31 December 2017 with my last pay check/lump sum leave paid 12 Jan 2018. For Social Security benefits, is this considered 2017 income or 2018 income? I used to have a info sheet on this but have lost it. I had an overpayment notice from the Social Security in mid 2019 and thought I had this cleared up, but received another notice yesterday. I did receive a 2018 W-2 that showed the payout and paid those taxes on my 2018 return.
TIA

[head]

I went through the same problem with Social Security when I retired 31 December 2016. You need to take a copy of your FERS paperwork which shows the effective date, which in your case would be 2018. Most importantly is take a copy of your last LES for December 2017 which will show the hours and dollar amount of your accrued annual leave. This will show the money paid to you for your annual leave is in 2017 not 2018. It does not matter that you received the money in 2018, what counts is that the money was due to you in 2017. It only took one visit to my local Social Security office to clear up the problem. After three weeks I checked my Social Security account on-line and my annual leave dollar amount was removed from their records as income. Within another week I received a letter stating the removal has been accomplished. Now you have paid taxes twice on your annual leave payment, once in 2017 and then again in 2018. If you received a large amount of money for your leave time, you could file an amendment for your 2018 taxes. Thanks and good luck.

[TLuke]

Thanks, head!
My SF50 shows retirement effective 12/31/17. I retired in middle of pay period 12/24/17-1/6/18 and was paid 1/12/18. But I did find SSA publication that says it’s earned income for the year earned (17) and not the year paid (18). I have rebuttal package ready to go to SSA. DFAS and SSA must not talk clearly to each other.
Regards!

[Wazzu82]

I retired on 12/31/18. I was a former CSRS employee that left the government in 1990, then came back in 1991 as a FERS employee. So it was very important for me to track this issue since I would have fallen under the Windfall Elimination Provision and have my social security be permanently cut by 5% for each year under 35 years of not paying social security taxes and having "substantial earnings", an amount that's defined under the WEP's rules. 2019 was my 35th year of "substantial income" and freed me from the WEP rules, even though I didn't work at all in 2019.

I carefully planned my retirement to be at the end of 2018 so that my final two 2018 paychecks (which were paid in January 2019), plus my annual leave lump sum check paid in 2019, would all be counted as 2019 income, and would be enough income to put me over the SSA's limit for "substantial income" under the Windfall Elimination Provision rules.

It worked out perfectly since income is counted in the year received, not the year you earned it. SSA is right and you'll see on your current SSA statement that they counted your final paychecks that were received in 2018 as 2018 income. This is how it works, and you stated your W-2 showed that as 2018 income as well, so you paid income taxes on that income for 2018, not 2017.

Hope this helps, I know the WEP stuff doesn't apply to you but the rules regarding income are the same for everyone. All you have to do is go back and look at your income for every December/January of your entire career...your income counts in the year you received it, not the year you earned it.