Your 1099R tax statement includes 13 payments this year. This isn’t a mistake. The pay schedule for military retirees changed in mid-2011 because of the 2011 National Defense Authorization Act.
The Defense Finance and Accounting Service now pays military retirees on the first day of the month. When that day is a weekend or national holiday, the official pay date must be moved to the previous business day.
As a result, the payment originally scheduled for Jan. 3, 2012 was issued Dec. 30, 2011.
This means you received a total of 13 payments in 2011. The first was on Jan. 3, 2011 and the last on Dec. 30, 2011. This may increase your tax liability.
Some financial institutions credit members’ accounts before the official pay date. If your credit union is one of them, perhaps you always received a payment at the end of December. That’s a nice benefit, but it does not affect your tax liability. The IRS bases taxes on when DFAS issues the pay (the official pay date), not when a bank posts it to your account.
For example, DFAS issued your December 2010 pay on Jan. 3, 2011. But even before the change in the law, some credit unions credited member accounts on Dec. 30, 2010. Because the official pay date was Jan. 3, the IRS treats it as taxable income for 2011.
However, this year, to comply with the new law, the official Jan. 3, 2012 pay date moved to Dec. 30, 2011. That makes it taxable income for 2011.
Please contact your tax advisor or the IRS with questions on this subject. DFAS cannot give tax advice.
Because Jan. 1 is always a federal holiday, going forward we will always process your pay in December. So in 2012 and beyond, you will receive the normal 12 pay checks.
The following payments are affected by the pay schedule change:
Annuity Pay is not affected by this change.