For 14 years I put money into the state deferred comp program. After, 12 years I realized that the money that I had put in was taxed. I asked my public employer and deferred comp what I should do about the 12 years of being taxed and they have no clue. I have recently changed jobs and am taking the money out but now I am being taxed again. What do I do? I put in $360 a year and it was taxed - school, local, state and federal for at least 12 years then when it was brought to both parties attention it was then tax deferred. I know it may not be much but I do not want to be taxed twice. When I filed out the paperwork to get my lump sum def comp made me sign to have federal taxes 10/20% taken out. Wouldn't I get interest on the money that went towards taxes all those years?
Employee Benefits Lawyer
I would first talk with your accountant to see which is the best method to pursue: (1) Get refunds on the taxes you paid; or (2) take the money out on an after tax basis. Depending on what your accountant says, then you might want to talk to a tax attorney about (1) above. I am assuming that the program was a Code Section 457(b) plan. You can go back and get refunds for years that are still open (there is a three year statute of limitations unless the amounts exceed 25% of your taxable income and then it is a six year statute). I suggest you get a tax attorney, because there is a relatively obscure set of rules that allow taxpayers the ability to open closed years because the inclusion or exclusion of tax in a previous year will impact the taxation of the item in a later tax year.
First, figure out if it makes sense to take the funds out without having the distributions be taxed. If that does not make economic sense, get a tax attorney.
I also note that you may have an action against your former employer for negligently reporting your income to the state and federal government.