Do I have to pay tax on accrued annual leave payments?

If you are a federal employee and receive a lump sum payment for accrued annual leave when you retire or resign, this amount will be included as taxable income on your Form W-2 and must be reported on your tax return.

If you resign from one agency and are re-employed by another agency, you may have to repay part of your lump sum accrued annual leave payment to the second agency. You can reduce gross wages on your tax return by the amount of accrued annual leave you repaid in the same tax year in which you receive it. You should attach to your tax return a copy of the receipt for the repaid accrued annual leave or a statement furnished by the agency to which repayment of the accrued annual leave is made to explain the difference between the wages on the IRS tax return and the wages on your Form W-2.

Related tax information about accrued annual leave

Tax Directory Topics:
Income Related Questions and Answers

IRS publications about accrued annual leave:
See IRS Publication 17,

Your Federal Income Tax. Please read this IMPORTANT Editor's Note regarding navigating IRS publications with Adobe Acrobat Reader.
IRS publications can also be ordered by calling 1-800-829-3676.

Customer Support

Still have IRS or tax questions?
To view the alphabetical Master Index of all tax and IRS topics click here.

Ask Julian Block your IRS and tax questions!

If you can't find the answer to your IRS or tax question in our web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine.

To call Julian for a tax consultation click here.

Prepare your IRS tax return and State tax return online - If you'd like to e-file and/or print your IRS tax return or State tax return online click here.