Charlie Seipelt: More about STRS tax withholding

Charlie Seipelt to Molly Janczyk, January 12, 2010
Subject: Re: Gary: About STRS Withholding Amounts Important

Molly:
I don't know who Gary is but I'm glad my call alerted him and others at STRS to the fact that they had a problem with their computer system and it needed to be fixed. What Gary didn't completely explain in his letter is that when you do your taxes the first question they ask is what is your gross pay. Then they ask what is the taxable amount. Well, the taxable amount is that part of your gross retirement minus the amount that is considered pre-taxed from the years you paid into the system (or taxable income). They amortize that portion over what they consider your life expectancy and I'll wager that most people don't understand why (but are happy) they aren't being taxed on their full income as shown on the gross income line. It was about ten years ago that they changed to this revised process from not starting to do the amortizing until after a few years into retirement (five I think) to starting the exclusion from year one. This started about the time I retired so I don't really know that much about the past procedure.

THE BIG THING IS.................IT'S ALL PAPER WORK AS FAR AS WE ARE CONCERNED. THE FINAL AMOUNT BEING WITHHELD ON THE COMPUTER AND ON PAPER WILL COME OUT THE SAME IN SPITE OF THE CONFUSION THAT IT MAY CAUSE. HOWEVER, ANYONE WHO KEEPS RECORDS OF SUCH THINGS LIKES TO SEE HOW THE NUMBERS ADD UP AND TRY TO MAKE SOME SENSE AS TO HOW WE GET FROM POINT A TO POINT B.

As far as the issue about the different withholding is concerned ......... I see no problem, as that is something from the government tax charts that tend to change each year. STRS cannot be held accountable for that as they only apply the withholding according to the tax laws that are sent to them from the IRS. It's unfortunate STRS doesn't send out some type of notice to remind retirees to expect to see a change coming in our withholding (according to pending Federal Tax Laws) at the start of each calendar year. Since it appears to be a common problem for them to have to field calls each year I would think someone would have come up with that idea some time ago. I would suggest a good time to do it would be to send this notice along with the information about the changes in the health care to help folks prepare for their upcoming financial year. I guess they don't do that as they don't want to be put into the position of predicting what Congress is going to do and the IRS only follows their lead in regard to taxation. Being that we are educators we tend to think of a year as from the time school starts and when it ends (school year) and we often forget that the rest of the world is on the (calendar year) January thru December. Thus, any change in our retirement checks is only seen two times a year and we aren't used to that. The two times are: when we get our COLA (let's hope that continues) and then at the start of each new calendar year when insurance premiums and taxes change.

I just hope other retirees did the same thing my wife and I did when the stimulus issue came about and the withholding changed to make us think we had more spendable income to stimulate the economy. If they didn't make additional withholding plans at that time I'm sure they will see the entire GIFT our Democratic Congress provided a little differently. I'm personally holding my breath waiting to see what the Ohio Legislators will be doing in regard to Ohio Taxation. At the present time Ohio's unbalanced budget makes me very leery as they appear to be looking at anything and everything to tax in their effort to bail us out. But that's another story.

Charlie Seipelt
Milford