Originally Posted by ldtoler
I am the beneficiary of my daughter's Deceased Federal Employee Unpaid Compensation. Is this payment taxable to me?
Whether you are receiving money through the Civil Service Retirement System or the Federal Employee Retirement System , most of your income will generally be taxed at ordinary income tax rates. But
You will not pay taxes on the money your daughter has paid into the retirement system over the years she worked for US government. Your daughter already paid taxes on the money when it was taken out of her pay check . If she dies before receiving her contributions back, you ,if she has elected a survivor annuity, will continue to receive her contributions back tax free.
For state return, the compensation benefits may be partially taxable or non-taxable; you need to contact the dept of revenue of your home state for more info.