Retiree Pay Date Changes: Good and Bad
The Defense Finance and Accounting Service (DFAS) announced this week that retirees will see changes to two upcoming monthly retiree checks that will make it easier to keep their monthly bill payments straight...but could potentially affect their tax liability.
The changes were mandated by a provision in the FY2011 Defense Authorization Act.
Normally, military retired pay is processed on the first day of the month, but when that fell on a weekend or holiday, the previous law delayed retired pay checks until the day after the weekend/holiday.
The recent law change now requires DFAS to process retiree pay on the preceding business day when the first day of the month falls on a weekend or national holiday.
This affects retired pay checks previously scheduled for Oct 3, 2011 and Jan 3, 2012, but which now will be issued on Sep 30, 2011 and Dec 30, 2011 respectively.
This change adjusts retired pay, Concurrent Retirement and Disability Pay (CRDP), Combat-Related Special Compensation (CRSC), retiree allotments, garnishments, and court-ordered former spouse and child support payments; however, it does not affect survivor benefit plan annuity payments.
The good news is that retirees will now have access to their monthly retired pay in order to transfer funds or pay bills that come due on the first of the month.
The bad news (for 2011, anyway) is that, for tax purposes, retirees will see 13 rather than the normal 12 payments for calendar year 2011. Depending on their withholding situation, this could mean a higher-than expected tax liability when filing income taxes next spring. For tax year 2012 and beyond, retirees will receive their normal 12 payments.
DFAS recommends that customers speak with a tax advisor, the Internal Revenue Service, or their own state tax authority to determine how this change might impact their tax liability.
Those who wish to adjust their state or federal tax withholdings from retired pay can do that "online" 24 hours-a-day, seven days-a-week, on the "myPay" website. © MOAA 2011
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