Proportional Distributions
All withdrawals from your account are paid proportionally from taxable and nontaxable amounts in your traditional and Roth balances.

Tax Reporting
Withdrawals from your account are reported as death benefit payments to the IRS on the 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

When you withdraw your money from the TSP, the tax rules that apply depend on the type of money that is included in your withdrawal payment.

Tax Treatment of Traditional Money


When you withdraw your money, you will owe taxes on any traditional (tax-deferred) contributions in your account (except contributions made from tax-exempt pay), and earnings they have accrued.

You can continue to defer taxes by transferring or rolling over your payment to a traditional IRA or an eligible employer plan. You can transfer your payment to a Roth IRA but you will have to pay taxes on the transferred amount in the year of the transfer.

Tax Treatment of Roth Money


When you withdraw your money, you will not have to pay taxes on any Roth contributions because taxes have already been paid. The earnings on Roth contributions are qualified (i.e., paid tax-free) when withdrawn if 5 years have passed since January 1 of the calendar year in which the deceased participant first made a TSP Roth contribution.

If your Roth earnings are not qualified, you can continue to defer taxes on them by transferring your payment to a Roth IRA or Roth account maintained by an eligible employer plan.

Tax Treatment of Tax-Exempt Money


When you withdraw your money, any tax-exempt money (in your traditional balance) from pay that was earned in a combat zone is paid tax-free. However, you will have to pay taxes on the earnings on these contributions.

You can log into My Account on the TSP website using your account number and Web password to see the breakdown of your account into traditional, Roth, and tax-exempt funds. You can also check your quarterly or annual statement for this information.

The tax rules that apply to distributions from your TSP beneficiary participant account are complex. For more information, refer to the tax notice “Important Tax Information About Payments From Your TSP Account,” which is available on the TSP website or directly from the TSP. You may also want to consult with a tax advisor or the IRS before you make any withdrawal decisions.