Part 2: Taxation of FDNY-NYPD 3/4 Pensions

The following is an example based on actual numbers of a Thomann Tax client affected by the discrepancy regarding the taxation of 3/4 FDNY-NYPD pensions as reviewed in a previous blog post.  Thomann Tax analyzed the client’s 2015, 2016, and 2017 tax returns and determined that the client paid $9,753 ($3,196 for year 2015, $3,458 for year 2016, & $3,099 for year 2017) more in federal income tax than what was required over the three year period.  The tables below summarize the results based on $101,662 of applicable pension contributions.

Tax Returns Based on Pension Fund 1099Rs

Item

Tax Year 2015 Tax Year 2016

Tax Year 2017

Adjusted gross income $199,748 $233,449 $215,877
Itemized deductions $26,619 $43,202 $27,438
Personal exemptions $8,000 $8,100 $8,100
Taxable income $165,129 $182,147 $180,339
Total federal tax $31,114 $35,457 $34,632


Thomann Tax Interpretation

Item

Tax Year 2015 Tax Year 2016

Tax Year 2017

Adjusted gross income $188,522 $222,223 $204,651
Itemized deductions $27,742 $44,325 $27,438
Personal exemptions $8,000 $8,100 $8,100
Taxable income $152,780 $169,798 $169,113
Total federal tax $27,918 $31,999 $31,533

Note: How an ADR retiree is affected by this issue is individualized.

3 replies
  1. Jim
    Jim says:

    So basically the retiree has been paying more tax to the IRS than they were required to? This would likely pertain to all retirees since 2009 when the pension fund was required to change how they reported accidental disability retirements to the IRS?

      • Jim
        Jim says:

        Wow, that’s crazy! So you using the above example, if that client retired in 2009 they would have already overpaid federal taxes by more than $30,000 after filing 2018 taxes! And will continue to overpay until the pension fund corrects their reporting error.

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