IRS Publication 571
What Is IRS Publication 571: Tax-Sheltered Annuity Plans (403(b) Plans)?
IRS Publication 571: Tax-Sheltered Annuity Plans (403(b) Plans) gives tax data to filers who have a 403(b) retirement plan. IRS Publication 571 shows who can add to a 403(b) plan, the maximum contribution that can be made to a 403(b) plan during the year, rules in regards to excess contributions, and the rules with respect to rollovers or distributions.
Contributions for a 403(b) plan are generally reported in an employee's W-2 by the employer and needn't bother with to be reported by the individual employee to the IRS.
Understanding IRS Publication 571: Tax-Sheltered Annuity Plans (403(b) Plans)
While IRS Publication 571 gives a few data on rollovers and distributions of 403(b) accounts, it doesn't dive into specific subtleties. Specifics for rollovers can be found in [IRS Publication 590](/irs-bar 590), and data on distributions in [Publication 575](/irs-bar 575).
Special Considerations
The IRS notes that a 403(b) plan, otherwise called a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain pastors. Likewise eligible are cooperative hospital service organizations, civilian workforce, and staff of the Uniformed Services University of the Health Sciences, and employees of public school systems organized by Indian ancestral legislatures.
Individual accounts in a 403(b) plan can be any of the following types:
- A annuity contract gave through an insurance organization
- A custodial account invested in mutual funds
- A retirement income account set up for chapel employees
Generally, retirement income accounts can invest in either annuities or mutual funds.
Like a 401(k) or IRA, you don't pay income tax on contributions until you start making withdrawals from the plan, as a rule, after you retire. Account principal and returns are not taxed until you withdraw them. Starting around 2021, plan participants must start taking required least distributions (RMDs) from their retirement accounts by April 1 following the year they arrive at age 72.
As per the IRS, one extra benefit might be "on the off chance that you or your employer make eligible contributions to a retirement plan, you might have the option to assume a praise of up to $1,000 (up to $2,000 if filing jointly). This credit could reduce the federal income tax you pay dollar for dollar." This is called the saver's tax credit.
There are limits on adjusted gross income for the credit, however. They are $66,000 for 2021 ($65,000 for 2020) assuming your filing status is married filing jointly; $49,500 for 2021 ($48,750 for 2020) in the event that your filing status is head of household (with qualifying person); or $33,000 for 2021 ($32,500 for 2020) assuming that your filing status is single, married filing separately, or qualifying widow(er) with dependent child.
Roth forms of the 403(b) might be available, allowing you to contribute after-tax money that can grow with no endless supply of principal or returns.
