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Some federal retirees could be overpaying Oklahoma taxes

Oklahoma excludes from state taxes 100 percent of what federal retirees paid into the old Civil Service Retirement System, though many retirees, and even tax preparers, miss that fact, expert says.
by Paula Burkes Modified: March 10, 2014 at 11:11 am •  Published: March 9, 2014

Some retired federal employees of Tinker Air Force Base, the U.S. Postal Service or the Veterans Health Administration who paid into the old Civil Service Retirement System inadvertently could be paying state taxes that they don’t owe.

Since the 2011 tax year, Oklahoma excludes from state taxes 100 percent of what those federal retirees paid into the Civil Service Retirement System in lieu of Social Security. The tax savings means those retirees can keep hundreds of dollars more a year, experts say. For example, a federal retiree whose pension totals $37,000 annually would save $836 under the state tax exclusion.

Still, many retirees and tax preparers miss that fact, and continue to overpay hundreds of dollars in state taxes, said Sean Reed of Reed’s Tax Service in Midwest City. People can file an amendment on past returns to recoup overpayment, but only for the three previous years, he said.

“If you owe the government, you owe them forever,” Reed said. “But if they owe you, it’s only for three years.”

So affected state filers — potentially tens of thousands in Oklahoma — face an April 15 deadline to file amendments to their 2011, 2012 and 2013 tax returns.

Last year, Newalla residents and Tinker retirees Tom and Tandye Kramer got back $4,112 after Reed filed amendments to three prior returns because of state tax overpayments made on Tom’s pension.

“He’d said we might be able to get some money back, but holy moly, I never expected $4,000,” said Tandye Kramer, 56.

The unexpected return, she said, was a welcome addition to the college fund of their daughter, who’s studying computer graphics at Rose State College.

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by Paula Burkes
A 1981 journalism graduate of Oklahoma State University, Paula Burkes has more than 30 years experience writing and editing award-winning material for newspapers and healthcare, educational and telecommunications institutions in Tulsa, Oklahoma...
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