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Tax Question! thrift saving withdrawal reported as earned income? Why?

Asked by: posadas 695 views YA Discussion

I withdrew my Thrift Savings Plan last year, and I understand the paying the taxes part of it…BUT…why is it considered “earned income”….(at least that is how the guy at H&R Block did it)…I am on SS Disability, so this so-called “earned income” (my TSP withdrawal) made my SS income be taxed 85% …not to mention that it raised my taxes owed to a Gut-wrenching high amount. Might also make SS take a look and wonder why I “Earned” so much and did not report it to them as “earned” income (?)…is there anything I can do? Did he prepare my taxes right?

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  1. Quick Answers on Mar 12, 2013 Reply

    Review your tax return carefully.

    Where was the money listed? If was line 7 (wages), it’s in the wrong place. line 7 can get you EIC and this is NOT earned income for EIC purposes.

    It should be on the pension line and fully taxable. If you are under 59.5 years of age you will owe a penalty.

    The SSA taxable amount depends on your total other income. Yes, the TSP withdrawal is part of total income.

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