Publication 571 (1-2014) TAX-SHELTERED ANNUITY PLANS (403(B) PLANS)
Publication 571 (1-2014)
- Institutional AuthorsInternal Revenue Service
- Jurisdictions
- LanguageEnglish
Future Developments
For the latest information about developments related to Publication 571 and its instructions, such as legislation enacted after they were published, go to http://www.irs.gov/pub571.
Retirement savings contributions credit. For 2013, the adjusted gross income limitations have increased from $57,500 to $59,000 for married filing jointly filers, from $43,125 to $44,250 for head of household filers, and from $28,750 to $29,500 for single, married filing separately, or qualifying widow(er) with dependent child filers. See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for additional information.
Limit on elective deferrals. For 2013, the limit on elective deferrals has increased from $17,000 to $17,500.
Limit on annual additions. For 2013, the limit on annual additions has increased from $50,000 to $51,000.
Retirement savings contributions credit. For 2014, the adjusted gross income limitations have increased from $59,000 to $60,000 for married filing jointly filers, from $44,250 to $45,000 for head of household filers, and from $29,500 to $30,000 for single, married filing separately, or qualifying widow(er) with dependent child filers. See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for additional information.
Limit on elective deferrals. For 2014, the limit on elective deferrals remains unchanged at $17,500.
Limit on annual additions. For 2014, the limit on annual additions has increased from $51,000 to $52,000.
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This publication can help you better understand the tax rules that apply to your 403(b) (tax-sheltered annuity) plan.
In this publication, you will find information to help you:
• Determine the maximum amount that can be contributed to your
403(b)account in 2014.
• Determine the maximum amount that could have been contributed to your 403(b) account in 2013.
• Identify excess contributions.
• Understand the basic rules for claiming the retirement savings contributions credit.
• Understand the basic rules for distributions and rollovers from 403(b) accounts.
This publication does not provide specific information on the following topics.
• Distributions from 403(b) accounts. This is covered in
Publication 575, Pension and Annuity Income.
• Rollovers. This is covered in Publication 590, Individual Retirement Arrangements (IRAs).
How to use this publication.
This publication is organized into chapters to help you find information easily.
Chapter 1 answers questions frequently asked by 403(b) plan participants.
Chapters 2 through 6 explain the rules and terms you need to know to figure the maximum amount that could have been contributed to your 403(b) account for 2013 and the maximum amount that can be contributed to your 403(b) account in 2014.
Chapter 7 provides general information on the prevention and correction of excess contributions to your 403(b) account.
Chapter 8 provides general information on distributions, transfers, and rollovers.
Chapter 9 provides blank worksheets that you will need to accurately and actively participate in your 403(b) plan. Filled-in samples of most of these worksheets can be found throughout this publication.
Chapter 10 explains the rules for claiming the retirement savings contributions credit (saver's credit).
Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.
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Tax questions. If you have a tax question, check the information available on IRS.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.
Useful Items
You may want to see:
Publication
•
Publication 517Social Security and Other Information for Members of the Clergy and Religious Workers
• Publication 575 Pension and Annuity Income
• Publication 590 Individual Retirement Arrangements (IRAs)
Form (and Instructions)
•
Form W-2Wage and Tax Statement
• Form 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
• Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
• Form 5330 Return of Excise Taxes Related to Employee Benefit Plans
1. 403(b) Plan Basics
This chapter introduces you to 403(b) plans and accounts. Specifically, the chapter answers the following questions.
• What is a
403(b)plan?
• What are the benefits of contributing to a 403(b) plan?
• Who can participate in a 403(b) plan?
• Who can set up a 403(b) account?
• How can contributions be made to my 403(b) account?
• Do I report contributions on my tax return?
• How much can be contributed to my 403(b) account?
What Is a 403(b) Plan?
A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers.
Individual accounts in a 403(b) plan can be any of the following types.
• An annuity contract, which is a contract provided through an insurance company,
• A custodial account, which is an account invested in mutual funds, or
• A retirement income account set up for church employees. Generally, retirement income accounts can invest in either annuities or mutual funds.
We use the term "
403(b)account" to refer to any one of these funding arrangements throughout this publication, unless otherwise specified.
What Are the Benefits of Contributing to a 403(b) Plan?
There are three benefits to contributing to a 403(b) plan.
• The first benefit is that you do not pay income tax on allowable contributions until you begin making withdrawals from the plan, usually after you retire. Allowable contributions to a
403(b)plan are either excluded or deducted from your income. However, if your contributions are made to a Roth contribution program, this benefit does not apply. Instead, you pay income tax on the contributions to the plan but distributions from the plan (if certain requirements are met) are tax free.
Note.
Generally, employees must pay social security and Medicare tax on their contributions to a
403(b)plan, including those made under a salary reduction agreement. See chapter 4,
Limit on Elective Deferrals,for more information.
• The second benefit is that earnings and gains on amounts in your
403(b)account are not taxed until you withdraw them. Earnings and gains on amounts in a Roth contribution program are not taxed if your withdrawals are qualified distributions. Otherwise, they are taxed when you withdraw them.
• The third benefit is that you may be eligible to take a credit for elective deferrals contributed to your 403(b) account. See chapter 10, Retirement Savings Contributions Credit (Saver's Credit).
Excluded.
If an amount is excluded from your income, it is not included in your total wages on your Form W-2. This means that you do not report the excluded amount on your tax return.
Deducted. If an amount is deducted from your income, it is included with your other wages on your Form W-2. You report this amount on your tax return, but you are allowed to subtract it when figuring the amount of income on which you must pay tax.
Who Can Participate in a 403(b) Plan?
Any eligible employee can participate in a 403(b) plan.
Eligible employees. The following employees are eligible to participate in a 403(b) plan.
• Employees of tax-exempt organizations established under section
501(c)(3). These organizations are usually referred to as section
501(c)(3)organizations or simply 501(c)(3) organizations.
• Employees of public school systems who are involved in the day-to-day operations of a school.
• Employees of cooperative hospital service organizations.
• Civilian faculty and staff of the Uniformed Services University of the Health Sciences.
• Employees of public school systems organized by Indian tribal governments.
• Certain ministers (explained next).
Ministers.
The following ministers are eligible employees for whom a
403(b)account can be established.
1. Ministers employed by section
501(c)(3)organizations.
2. Self-employed ministers. A self-employed minister is treated as employed by a tax-exempt organization that is a qualified employer.
3. Ministers (chaplains) who meet both of the following requirements.
a. They are employed by organizations that are not section
501(c)(3)organizations.
b. They function as ministers in their day-to-day professional responsibilities with their employers.
Throughout this publication, the term
chaplainwill be used to mean ministers described in the third category in the list above.
Example. A minister employed as a chaplain by a state-run prison and a chaplain in the United States Armed Forces are eligible employees because their employers are not section 501(c)(3) organizations and they are employed as ministers.
Who Can Set Up a 403(b) Account?
You cannot set up your own 403(b) account. Only employers can set up 403(b) accounts. A self-employed minister cannot set up a 403(b) account for his or her benefit. If you are a self-employed minister, only the organization (denomination) with which you are associated can set up an account for your benefit.
How Can Contributions Be Made to My 403(b) Account?
Generally, only your employer can make contributions to your 403(b) account. However, some plans will allow you to make after-tax contributions (defined below).
The following types of contributions can be made to 403(b) accounts.
1.
Elective deferrals.These are contributions made under a salary reduction agreement. This agreement allows your employer to withhold money from your paycheck to be contributed directly into a
403(b)account for your benefit. Except for Roth contributions, you do not pay income tax on these contributions until you withdraw them from the account. If your contributions are Roth contributions, you pay taxes on your contributions but any qualified distributions from your Roth account are tax free.
2. Nonelective contributions. These are employer contributions that are not made under a salary reduction agreement. Nonelective contributions include matching contributions, discretionary contributions, and mandatory contributions from your employer. You do not pay income tax on these contributions until you withdraw them from the account.
3. After-tax contributions. These are contributions (that are not Roth contributions) you make with funds that you must include in income on your tax return. A salary payment on which income tax has been withheld is a source of these contributions. If your plan allows you to make after-tax contributions, they are not excluded from income and you cannot deduct them on your tax return.
4. A combination of any of the three contribution types listed above.
Self-employed minister.
If you are a self-employed minister, you are considered both an employee and an employer, and you can contribute to a retirement income account for your own benefit.
Do I Report Contributions on My Tax Return?
Generally, you do not report contributions to your 403(b) account (except Roth contributions) on your tax return. Your employer will report contributions on your 2013 Form W-2. Elective deferrals will be shown in box 12 and the Retirement plan box will be checked in box 13. If you are a self-employed minister or chaplain, see the discussions next.
Self-employed ministers. If you are a self-employed minister, you must report the total contributions as a deduction on your tax return. Deduct your contributions on line 28 of the 2013 Form 1040.
Chaplains. If you are a chaplain and your employer does not exclude contributions made to your 403(b) account from your earned income, you may be able to take a deduction for those contributions on your tax return.
However, if your employer has agreed to exclude the contributions from your earned income, you will not be allowed a deduction on your tax return.
If you can take a deduction, include your contributions on line 36 of the 2013 Form 1040. Enter the amount of your deduction and write "403(b)" on the dotted line next to line 36.
How Much Can Be Contributed to My 403(b) Account?
There are limits on the amount of contributions that can be made to your 403(b) account each year. If contributions made to your 403(b) account are more than these contribution limits, penalties may apply.
Chapters 2 through 6 provide information on how to determine the amount that can be contributed to your 403(b) account.
Worksheets are provided in Chapter 9 to help you determine the maximum amount that can be contributed to your 403(b) account each year. Chapter 7, Excess Contributions, describes how to prevent excess contributions and how to get an excess contribution corrected.
2. Maximum Amount Contributable (MAC)
Throughout this publication, the limit on the amount that can be contributed to your 403(b) account for any year is referred to as your maximum amount contributable (MAC). This chapter:
• Introduces the components of your MAC,
• Tells you how to figure your MAC, and
• Tells you when to figure your MAC.
Components of Your MAC
Generally, before you can determine your MAC, you must first figure the components of your MAC. The components of your MAC are:
• The limit on annual additions (chapter 3), and
• The limit on elective deferrals (chapter 4).
How Do I Figure My MAC?
Generally, contributions to your 403(b) account are limited to the lesser of:
• The limit on annual additions, or
• The limit on elective deferrals.
Depending upon the type of contributions made to your
403(b)account, only one of the limits may apply to you.
Which limit applies. Whether you must apply one or both of the limits depends on the type of contributions made to your 403(b) account during the year.
Elective deferrals only. If the only contributions made to your 403(b) account during the year were elective deferrals made under a salary reduction agreement, you will need to figure both of the limits. Your MAC is the lesser of the two limits.
Nonelective contributions only. If the only contributions made to your 403(b) account during the year were nonelective contributions (employer contributions not made under a salary reduction agreement), you will only need to figure the limit on annual additions. Your MAC is the limit on annual additions.
Elective deferrals and nonelective contributions. If the contributions made to your 403(b) account were a combination of both elective deferrals made under a salary reduction agreement and nonelective contributions (employer contributions not made under a salary reduction agreement), you will need to figure both limits. Your MAC is the limit on the annual additions.
You need to figure the limit on elective deferrals to determine if you have excess elective deferrals, which are explained in chapter 7.
Worksheets. Worksheets are available in chapter 9 to help you figure your MAC.
When Should I Figure My MAC?
At the beginning of 2014, you should refigure your 2013 MAC based on your actual compensation for 2013. This will allow you to determine if the amount that has been contributed to your 403(b) account for 2013 has exceeded the allowable limits. In some cases, this will allow you to avoid penalties and additional taxes. See chapter 7.
Generally, you should figure your MAC for the current year at the beginning of each tax year using a conservative estimate of your compensation. If your compensation changes during the year, you should refigure your MAC based on a revised conservative estimate. By doing this, you will be able to determine if contributions to your 403(b) account can be increased or should be decreased for the year.
The first component of MAC is the limit on annual additions. This is a limit on the total contributions (elective deferrals, nonelective contributions, and after-tax contributions) that can be made to your 403(b) account. The limit on annual additions generally is the lesser of:
• $51,000 for 2013 and $52,000 for 2014, or
• 100% of your includible compensation for your most recent year of service.
CAUTION: More than one 403(b) account. If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts on your behalf by your employer.
Ministers and church employees. If you are a minister or a church employee, you may be able to increase your limit on annual additions or use different rules when figuring your limit on annual additions. For more information, see chapter 5.
Participation in a qualified plan. If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control.
You can use Part I of Worksheet 1 in chapter 9 to figure your limit on annual additions.
Includible Compensation for Your Most Recent Year of Service
Definition. Generally, includible compensation for your most recent year of service is the amount of taxable wages and benefits you received from the employer that maintained a 403(b) account for your benefit during your most recent year of service.
When figuring your includible compensation for your most recent year of service, keep in mind that your most recent year of service may not be the same as your employer's most recent annual work period. This can happen if your tax year is not the same as your employer's annual work period.
When figuring includible compensation for your most recent year of service, do not mix compensation or service of one employer with compensation or service of another employer.
Most Recent Year of Service
Your most recent year of service is your last full year of service, ending on the last day of your tax year that you worked for the employer that maintained a 403(b) account on your behalf.
Tax year different from employer's annual work period. If your tax year is not the same as your employer's annual work period, your most recent year of service is made up of parts of at least two of your employer's annual work periods.
Example. A professor who reports her income on a calendar-year basis is employed on a full-time basis by a university that operates on an academic year (October through May). To figure her includible compensation for 2013, the professor's most recent year of service is her service from January through May 2013 and from October through December 2013.
Figuring Your Most Recent Year of Service
To figure your most recent year of service, begin by determining what is a full year of service for your position. A full year of service is equal to full-time employment for your employer's annual work period.
After identifying a full year of service, begin counting the service you have provided for your employer starting with the service provided in the current year.
Part-time or employed only part of the year. If you are a part-time or a full-time employee who is employed for only part of the year, your most recent year of service is your service this year and your service for as many previous years as is necessary to total 1 full year of service. To determine your most recent year of service, add the following periods of service:
• Your service during the year for which you are figuring the limit on annual additions, and
• Your service during your preceding tax years until the total service equals 1 year of service or you have figured all of your service with the employer.
Example.
You were employed on a full-time basis from July through December 2011 (1/2 year of service), July through December 2012 (1/2 year of service), and October through December 2013 (1/4 year of service). Your most recent year of service for computing your limit on annual additions for 2013 is the total of your service during 2013 (1/4 year of service), your service during 2012 (1/2 year of service), and your service during the months October through December 2011 (1/4 year of service).
Not yet employed for 1 year. If, at the close of the year, you have not yet worked for your employer for 1 year (including time you worked for the same employer in all earlier years), use the period of time you have worked for the employer as your most recent year of service.
Includible Compensation
After identifying your most recent year of service, the next step is to identify the includible compensation associated with that full year of service.
Includible compensation is not the same as income included on your tax return. Compensation is a combination of income and benefits received in exchange for services provided to your employer.
Generally, includible compensation is the amount of income and benefits:
• Received from the employer who maintains your
403(b)account, and
• Must be included in your income.
Includible compensation includes the following amounts.
• Elective deferrals (employer's contributions made on your behalf under a salary reduction agreement).
• Amounts contributed or deferred by your employer under a section 125 cafeteria plan.
• Amounts contributed or deferred, at the election of the employee, under an eligible section 457 nonqualified deferred compensation plan (state or local government or tax-exempt organization plan).
Note.
For information about treating elective deferrals under section
457plans as Roth contributions, see
Publication 575.
• Wages, salaries, and fees for personal services earned with the employer maintaining your
403(b)account.
• Income otherwise excluded under the foreign earned income exclusion.
• Pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan.
Includible compensation
does notinclude the following items.
1. Your employer's contributions to your
403(b)account.
2. Compensation earned while your employer was not an eligible employer.
3. Your employer's contributions to a qualified plan that:
a. Are on your behalf, and
b. Are excludable from income.
4. The cost of incidental life insurance. See
Cost of Incidental Life Insurance,later.
CAUTION: If you are a church employee or a foreign missionary, figure includible compensation using the rules explained in chapter 5.
Contributions after retirement. Nonelective contributions may be made for an employee for up to 5 years after retirement. These contributions would be based on includible compensation for the last year of service before retirement.
Cost of Incidental Life Insurance
Includible compensation does not include the cost of incidental life insurance.
CAUTION: If all of your 403(b) accounts invest only in mutual funds, then you have no incidental life insurance.
If you have an annuity contract, a portion of the cost of that contract may be for incidental life insurance. If so, the cost of the insurance is taxable to you in the year contributed and is considered part of your basis when distributed. Your employer will include the cost of your insurance as taxable wages in box 1 of Form W-2.
Not all annuity contracts include life insurance. Contact your plan administrator to determine if your contract includes incidental life insurance. If it does, you will need to figure the cost of life insurance each year the policy is in effect.
Figuring the cost of incidental life insurance. If you have determined that part of the cost of your annuity contract is for an incidental life insurance premium, you will need to determine the amount of the premium and subtract it from your includible compensation.
To determine the amount of the life insurance premiums, you will need to know the following information.
• The value of your life insurance contract, which is the amount payable upon your death.
• The cash value of your life insurance contract at the end of the tax year.
• Your age on your birthday nearest the beginning of the policy year.
• Your current life insurance protection under an ordinary retirement income life insurance policy, which is the amount payable upon your death minus the cash value of the contract at the end of the year.
You can use
Worksheet A,in chapter 9, to determine the cost of your incidental life insurance.
Example. Your new contract provides that your beneficiary will receive $10,000 if you should die before retirement. Your cash value in the contract at the end of the first year is zero. Your current life insurance protection for the first year is $10,000 ($10,000 - 0).
The cash value in the contract at the end of year two is $1,000, and the current life insurance protection for the second year is $9,000 ($10,000 - $1,000).
The 1-year cost of the protection can be calculated by using Figure 3-1, Table of One-Year Term Premiums for $1,000 Life Insurance Protection. The premium rate is determined based on your age on your birthday nearest the beginning of the policy year.
Figure 3-1. Table of One-Year Term Premiums for $1,000 Life Insurance Protection
Age Cost
--------------------
0 $0.70
1 0.41
2 0.27
3 0.19
4 0.13
5 0.13
6 0.14
7 0.15
8 0.16
9 0.16
10 0.16
11 0.19
12 0.24
13 0.28
14 0.33
15 0.38
16 0.52
17 0.57
18 0.59
19 0.61
20 0.62
21 0.62
22 0.64
23 0.66
24 0.68
25 0.71
26 0.73
27 0.76
28 0.80
29 0.83
30 0.87
31 0.90
32 0.93
33 0.96
34 0.98
35 0.99
36 1.01
37 1.04
38 1.06
39 1.07
40 1.10
41 1.13
42 1.20
43 1.29
44 1.40
45 1.53
46 1.67
47 1.83
48 1.98
49 2.13
50 2.30
51 2.52
52 2.81
53 3.20
54 3.65
55 4.15
56 4.68
57 5.20
58 5.66
59 6.06
60 6.51
61 7.11
62 7.96
63 9.08
64 10.41
65 11.90
66 13.51
67 15.20
68 16.92
69 18.70
70 20.62
71 22.72
72 25.07
73 27.57
74 30.18
75 33.05
76 36.33
77 40.17
78 44.33
79 49.23
80 54.56
81 60.51
82 66.74
83 73.07
84 80.35
85 88.76
86 99.16
87 110.40
88 121.85
89 133.40
90 144.30
91 155.80
92 168.75
93 186.44
94 206.70
95 228.35
96 250.01
97 265.09
98 270.11
99 281.05
CAUTION: If the current published premium rates per $1,000 of insurance protection charged by an insurer for individual 1-year term life insurance premiums available to all standard risks are lower than those in the preceding table, you can use the lower rates for figuring the cost of insurance in connection with individual policies issued by the same insurer.
Example 1. Lynne Green, age 44, and her employer enter into a 403(b) plan that will provide her with a $500 a month annuity upon retirement at age 65. The agreement also provides that if she should die before retirement, her beneficiary will receive the greater of $20,000 or the cash surrender value in the life insurance contract. Using the facts presented we can determine the cost of Lynne's life insurance protection as shown in Table 3-1.
Lynne's employer has included $28 for the cost of the life insurance protection in her current year's income. When figuring her includible compensation for this year, Lynne will subtract $28.
Table 3-1. Worksheet A. Cost of Incidental Life Insurance
Note. Use this worksheet to figure the cost of incidental
life insurance included in your annuity contract. This amount
will be used to figure includible compensation for your most
recent year of service.
----------------------------------------------------------------
1.
Enter the value of the
contract (amount payable
upon your death)
1.
$20,000.00
2.
Enter the cash value in the
contract at the end of the
year
2.
0.00
3.
Subtract line 2 from line 1.
This is the value of your
current life insurance
protection
3.
$20,000.00
4.
Enter your age on your
birthday nearest the
beginning of the policy
year
4.
44
5.
Enter the 1-year term
premium for $1,000 of life
insurance based on your
age. (From Figure 3-1)
5.
$1.40
6.
Divide line 3 by $1,000
6.
20
7.
Multiply line 6 by line 5.
This is the cost of your
incidental life insurance
7.
$28.00
----------------------------------------------------------------
Example 2.
Lynne's cash value in the contract at the end of the second year is $1,000. In year two, the cost of Lynne's life insurance is calculated as shown in Table 3-2.
In year two, Lynne's employer will include $29.07 in her current year's income. Lynne will subtract this amount when figuring her includible compensation.
Table 3-2. Worksheet A. Cost of Incidental Life Insurance
Note. Use this worksheet to figure the cost of incidental
life insurance included in your annuity contract. This amount
will be used to figure includible compensation for your most
recent year of service.
----------------------------------------------------------------
1.
Enter the value of the
contract (amount payable
upon your death)
1.
$20,000.00
2.
Enter the cash value in the
contract at the end of the
year
2.
$1,000.00
3.
Subtract line 2 from line 1.
This is the value of your
current life insurance
protection
3.
$19,000.00
4.
Enter your age on your
birthday nearest the
beginning of the policy
year
4.
45
5.
Enter the 1-year term
premium for $1,000 of life
insurance based on your
age. (From Figure 3-1)
5.
$1.53
6.
Divide line 3 by $1,000
6.
19
7.
Multiply line 6 by line 5.
This is the cost of your
incidental life insurance
7.
$29.07
----------------------------------------------------------------
Figuring Includible Compensation for Your Most Recent Year of Service
You can use Worksheet B in chapter 9 to determine your includible compensation for your most recent year of service.
Example. Floyd has been periodically working full-time for a local hospital since September 2011. He needs to figure his limit on annual additions for 2014. The hospital's normal annual work period for employees in Floyd's general type of work runs from January to December.
During the periods that Floyd was employed with the hospital, the hospital has always been eligible to provide a 403(b) plan to employees. Additionally, the hospital has never provided the employees with a 457 deferred compensation plan, a transportation fringe benefit plan, or a cafeteria plan.
Floyd has never worked abroad and there is no life insurance provided under the plan.
Table 3-3 shows the service Floyd provided to his employer, his compensation for the periods worked, his elective deferrals, and his taxable wages.
Table 3-3. Floyd's Compensation
Note. This table shows information Floyd will
use to figure includible compensation for his
most recent year of service.
---------------------------------------------
Years of Taxable Elective
Year Service Wages Deferrals
---------------------------------------------
2014 6/12 of $42,000 $2,000
a year
---------------------------------------------
2013 4/12 of $16,000 $1,650
a year
---------------------------------------------
2012 4/12 of $16,000 $1,650
a year
---------------------------------------------
Before Floyd can figure his limit on annual additions, he must figure includible compensation for his most recent year of service.
Because Floyd is not planning to work the entire 2014 year, his most recent year of service will include the time he is planning to work in 2014 plus time he worked in the preceding 3 years until the time he worked for the hospital totals 1 year. If the total time he worked is less than 1 year, Floyd will treat it as if it were 1 year. He figures his most recent year of service shown in the following list.
• Time he will work in 2014 is 6/12 of a year.
• Time worked in 2013 is 4/12 of a year. All of this time will be used to determine Floyd's most recent year of service.
• Time worked in 2012 is 4/12 of a year. Floyd only needs 2 months of the 4 months he worked in 2012 to have enough time to total 1 full year. Because he needs only one-half of the actual time he worked, Floyd will use only one-half of his income earned during that period to calculate wages that will be used in figuring his includible compensation.
Using the information provided in Table 3-3, wages for Floyd's most recent year of service are $66,000 ($42,000 + $16,000 + $8,000). His includible compensation for his most recent year of service is figured as shown in Table 3-4.
After figuring his includible compensation, Floyd determines his limit on annual additions for 2014 to be $52,000, the lesser of his includible compensation, $70,475 (Table 3-4), and the maximum amount of $52,000.
Table 3-4. Worksheet B. Includible Compensation for Your Most Recent Year of Service1
Note. Use this worksheet to figure includible compensation for your
most recent year of service.
----------------------------------------------------------------------
1.
Enter your includible wages from the employer
maintaining your 403(b) account for your most recent
year of service
1.
$66,000
2.
Enter elective deferrals excluded from your gross
income for your most recent year of service
2
2.
4,475
3
3.
Enter amounts contributed or deferred by your
employer under a cafeteria plan for your most recent
year of service
3.
-0-
4.
Enter amounts contributed or deferred by your
employer according to your election to your 457
account (a nonqualified plan of a state or local
government, or of a tax-exempt organization) for
your most recent year of service
4.
-0-
5.
Enter pre-tax contributions (employer's
contributions made on your behalf according to your
election) to a qualified transportation fringe
benefit plan for your most recent year of service
5.
-0-
6.
Enter your foreign earned income exclusion for your
most recent year of service
6.
-0-
7.
Add lines 1, 2, 3, 4, 5, and 6
7.
70,475
8.
Enter the cost of incidental life insurance that is
part of your annuity contract for your most recent
year of service
8.
-0-
9.
Enter compensation that was
both:
• Earned during your most recent year of service,
and
• Earned while your employer was not qualified to
maintain a 403(b) plan
9.
-0-
10.
Add lines 8 and 9
10.
-0-
11.
Subtract line 10 from line 7. This is your
includible compensation for your most recent year of
service
11.
70,475
1
Use estimated amounts if figuring includible compensation before
the end of the year.
2
Elective deferrals made to a designated Roth account are not
excluded from your gross income and should not be included on this
line.
3
$4,475 ($2,000 + $1,650 + $825).
======================================================================
4. Limit on Elective Deferrals
The second and final component of MAC is the limit on elective deferrals. This is a limit on the amount of contributions that can be made to your account through a salary reduction agreement.
A salary reduction agreement is an agreement between you and your employer that allows for a portion of your compensation to be directly invested in a 403(b) account on your behalf. You can enter into more than one salary reduction agreement during a year.
CAUTION: More than one 403(b) account. If, for any year, elective deferrals are contributed to more than one 403(b) account for you (whether or not with the same employer), you must combine all the elective deferrals to determine whether the total is more than the limit for that year.
403(b) plan and another retirement plan. If, during the year, contributions in the form of elective deferrals are made to other retirement plans on your behalf, you must combine all of the elective deferrals to determine if they are more than your limit on elective deferrals. The limit on elective deferrals applies to amounts contributed to:
•
401(k) plans, to the extent excluded from income,• Roth contribution programs,
• Section 403(b) plans.
Roth contribution program.
Your
403(b)plan may allow you to designate all or a portion of your elective deferrals as Roth contributions. Elective deferrals designated as Roth contributions must be maintained in a separate Roth account and are not excludable from your gross income.
The maximum amount of contributions allowed under a Roth contribution program is your limit on elective deferrals, less your elective deferrals not designated as Roth contributions. For more information on the Roth contribution program, see Publication 560, Retirement Plans for Small Business.
Excess elective deferrals. If the amount contributed is more than the allowable limit, you must include the excess that is not a Roth contribution in your gross income for the year contributed.
General Limit
Under the general limit on elective deferrals, the most that can be contributed to your 403(b) account through a salary reduction agreement is $17,500 for 2013 and 2014. This limit applies without regard to community property laws.
15-Year Rule
If you have at least 15 years of service with an educational organization (such as a public or private school), hospital, home health service agency, health and welfare service agency, church, or convention or association of churches (or associated organization), the limit on elective deferrals to your 403(b) account is increased by the least of:
1. $3,000,
2. $15,000, reduced by the sum of:
a. The additional pre-tax elective deferrals made in prior years because of this rule, plus
b. The aggregate amount of designated Roth contributions permitted for prior years because of this rule, or
3. $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years.
If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013 and 2014.
To determine whether you have 15 years of service with your employer, see Years of Service, next.
Years of Service
To determine if you are eligible for the increased limit on elective deferrals, you will first need to figure your years of service. How you figure your years of service depends on whether you were a full-time or a part-time employee, whether you worked for the full year or only part of the year, and whether you have worked for your employer for an entire year.
You must figure years of service for each year during which you worked for the employer who is maintaining your 403(b) account.
If more than one employer maintains a 403(b) account for you in the same year, you must figure years of service separately for each employer.
Definition
Your years of service are the total number of years you have worked as a full time employee for the employer maintaining your 403(b) account as of the end of the year.
Figuring Your Years of Service
Take the following rules into account when figuring your years of service.
Status of employer. Your years of service include only periods during which your employer was a qualified employer. Your plan administrator can tell you whether or not your employer was qualified during all your periods of service.
Service with one employer. Generally, you cannot count service for any employer other than the one who maintains your 403(b) account.
Church employee. If you are a church employee, treat all of your years of service with related church organizations as years of service with the same employer. For more information about church employees, see chapter 5.
Self-employed ministers. If you are a self-employed minister, your years of service include full and part years in which you have been treated as employed by a tax-exempt organization that is a qualified employer.
Total years of service. When figuring prior years of service, figure each year individually and then add the individual years of service to determine your total years of service.
Example. The annual work period for full-time teachers employed by ABC Public Schools is September through December and February through May. Marsha began working with ABC schools in September 2009. She has always worked full-time for each annual work period. At the end of 2013, Marsha had 4.5 years of service with ABC Public Schools, as shown in Table 4-1.
Table 4-1. Marsha's Years of Service
Note. This table shows how Marsha figures her
years of service, as explained in the previous
example.
----------------------------------------------
Portion of
Period Work Years of
Year Worked Period Service
----------------------------------------------
2009 Sept.-Dec. .5 year .5 year
----------------------------------------------
Feb.-May .5 year
-------------------------
2010 Sept.- .5 year 1 year
Dec.
----------------------------------------------
Feb.-May .5 year
-------------------------
2011 Sept.- .5 year 1 year
Dec.
----------------------------------------------
Feb.-May .5 year
-------------------------
2012 Sept.- .5 year 1 year
Dec.
----------------------------------------------
Feb.-May .5 year
-------------------------
2013 Sept.- .5 year 1 year
Dec.
----------------------------------------------
Total years of service
4.5 years
----------------------------------------------
Full-time or part-time.
To figure your years of service, you must analyze each year individually and determine whether you worked full-time for the full year or something other than full-time. When determining whether you worked full-time or something other than full-time, use your employer's annual work period as the standard.
Employer's annual work period. Your employer's annual work period is the usual amount of time an individual working full-time in a specific position is required to work. Generally, this period of time is expressed in days, weeks, months, or semesters, and can span 2 calendar years.
Note. You cannot accumulate more than 1 year of service in a 12-month period.
Example. All full-time teachers at ABC Public Schools are required to work both the September through December semester and the February through May semester. Therefore, the annual work period for full-time teachers employed by ABC Public Schools is September through December and February through May. Teachers at ABC Public Schools who work both semesters in the same calendar year are considered working a full year of service in that calendar year.
Full-Time Employee for the Full Year
Count each full year during which you were employed full-time as 1 year of service. In determining whether you were employed full-time, compare the amount of work you were required to perform with the amount of work normally required of others who held the same position with the same employer and who generally received most of their pay from the position.
How to compare. You can use any method that reasonably and accurately reflects the amount of work required. For example, if you are a teacher, you can use the number of hours of classroom instruction as a measure of the amount of work required.
In determining whether positions with the same employer are the same, consider all of the facts and circumstances concerning the positions, including the work performed, the methods by which pay is determined, and the descriptions (or titles) of the positions.
Example. An assistant professor employed in the English department of a university will be considered a full-time employee if the amount of work that he or she is required to perform is the same as the amount of work normally required of assistant professors of English at that university who get most of their pay from that position.
If no one else works for your employer in the same position, compare your work with the work normally required of others who held the same position with similar employers or similar positions with your employer.
Full year of service. A full year of service for a particular position means the usual annual work period of anyone employed full-time in that general type of work at that place of employment.
Example. If a doctor works for a hospital 12 months of a year except for a 1-month vacation, the doctor will be considered as employed for a full year if the other doctors at that hospital also work 11 months of the year with a 1-month vacation. Similarly, if the usual annual work period at a university consists of the fall and spring semesters, an instructor at that university who teaches these semesters will be considered as working a full year.
Other Than Full-Time for the Full Year
If, during any year, you were employed full-time for only part of your employer's annual work period, part-time for the entire annual work period, or part-time for only part of the work period, your year of service for that year is a fraction of your employer's annual work period.
Full-time for part of the year. If, during a year, you were employed full-time for only part of your employer's annual work period, figure the fraction for that year as follows:
• The numerator (top number) is the number of weeks, months, or semesters you were a full-time employee.
• The denominator (bottom number) is the number of weeks, months, or semesters considered the normal annual work period for the position.
Example.
Jason was employed as a full-time instructor by a local college for the 4 months of the 2013 spring semester (February 2013 through May 2013). The annual work period for the college is 8 months (February through May and July through October). Given these facts, Jason was employed full-time for part of the annual work period and provided 1/2 of a year of service. Jason's years of service computation for 2013 is as follows:
Number of months
Jason worked 4 1
----------------------- = --- = ---
Number of months in 8 2
annual work period
Part-time for the full year.
If, during a year, you were employed part-time for the employer's entire annual work period, you figure the fraction for that year as follows:
• The numerator (top number) is the number of hours or days you worked.
• The denominator (bottom number) is the number of hours or days normally required of someone holding the same position who works full-time.
Example.
Vance teaches one course at a local medical school. He teaches 3 hours per week for two semesters. Other faculty members at the same school teach 9 hours per week for two semesters. The annual work period of the medical school is two semesters. An instructor teaching 9 hours a week for two semesters is considered a full-time employee. Given these facts, Vance has worked part-time for a full annual work period. Vance has completed 1/3 of a year of service, figured as shown below.
Number of hours per
week Vance worked 3 1
----------------------- = --- = ---
Number of hours per 9 3
week considered
full-time
Part-time for part of the year.
If, during any year, you were employed part-time for only part of your employer's annual work period, you figure your fraction for that year by multiplying two fractions.
Figure the first fraction as though you had worked full-time for part of the annual work period. The fraction is as follows:
• The numerator (top number) is the number of weeks, months, or semesters you were a full-time employee.
• The denominator (bottom number) is the number of weeks, months, or semesters considered the normal annual work period for the position.
Figure the second fraction as though you had worked part-time for the entire annual work period. The fraction is as follows:
• The numerator (top number) is the number of hours or days you worked.
• The denominator (bottom number) is the number of hours or days normally required of someone holding the same position who works full-time.
Once you have figured these two fractions, multiply them together to determine the fraction representing your partial year of service for the year.
Example. Maria, an attorney, teaches a course for one semester at a law school. She teaches 3 hours per week. The annual work period for teachers at the school is two semesters. All full-time instructors at the school are required to teach 12 hours per week. Based on these facts, Maria is employed part-time for part of the annual work period. Her year of service for this year is determined by multiplying two fractions. Her computation is as follows:
Maria's first fraction
Number of semesters Maria
worked 1
--------------------------------- = ---
Number of semesters in annual 2
work period
Maria's second fraction
Number of hours Maria
worked per week 3 1
----------------------- = ---- = ---
Number of hours per 12 4
week considered
full-time
Maria would multiply these fractions to obtain the fractional year of service:
1 1 1
--- x --- = ---
2 4 8
Figuring the Limit on Elective Deferrals
You can use Part II of Worksheet 1 in chapter 9 to figure the limit on elective deferrals.
Example
Floyd has figured his limit on annual additions. The only other component needed before he can determine his MAC for 2014 is his limit on elective deferrals.
Figuring Floyd's limit on elective deferrals. Floyd has been employed with his current employer for less than 15 years. He is not eligible for the special 15-year increase. Therefore, his limit on elective deferrals for 2014 is $17,500 as shown in Table 4-2.
Floyd's employer will not make any nonelective contributions to his 403(b) account and Floyd will not make any after-tax contributions. Additionally, Floyd's employer does not offer a Roth contribution program.
Figuring Floyd's MAC
Floyd has determined that his limit on annual additions for 2014 is $52,000 and his limit on elective deferrals is $17,500. Because elective deferrals are the only contributions made to Floyd's account, the maximum amount that can be contributed to a 403(b) account on Floyd's behalf in 2014 is $17,500, the lesser of both limits.
Table 4-2. Worksheet 1. Maximum Amount Contributable (MAC)
Note. Use this worksheet to figure your MAC.
----------------------------------------------------------------------
Part I. Limit on Annual Additions
1.
Enter your includible compensation for your most
recent year of service
1.
$70,475
2.
Maximum:
• For 2013 enter $51,000
• For 2014 enter $52,000
2.
52,000
3.
Enter the lesser of line 1 or line 2. This is your
limit on annual additions
3.
52,000
Caution:
If you had only nonelective contributions,
skip Part II and enter the amount from line 3 on
line 18.
Part II. Limit on Elective Deferrals
4.
Maximum contribution:
• For 2013, enter $17,500
• For 2014, enter $17,500
4.
17,500
Note.
If you have at least 15 years of service with a
qualifying organization, complete lines 5 through 17.
If not, enter zero (-0-) on line 16 and go to line
17.
5.
Amount per year of service
5.
5,000
6.
Enter your years of service
6.
_______
7.
Multiply line 5 by line 6
7.
_______
8.
Enter the total of all elective deferrals made for
you by the qualifying organization for prior years
8.
_______
9.
Subtract line 8 from line 7. If zero or less, enter
zero (-0-)
9.
_______
10.
Maximum increase in limit for long service
10.
15,000
11.
Enter the total of additional pre-tax elective
deferrals made in prior years under the 15-year rule
11.
_______
12.
Enter the aggregate amount of all designated Roth
contributions permitted for prior years under the
15-year rule
12.
_______
13.
Add lines 11 and 12
13.
_______
14.
Subtract line 13 from line 10
14.
_______
15.
Maximum additional contributions
15.
3,000
16.
Enter the least of lines 9, 14, or 15. This is your
increase in the limit for long service
16.
-0-
17.
Add lines 4 and 16. This is your limit on elective
deferrals
17.
17,500
Part III. Maximum Amount Contributable
18.
• If you had only nonelective contributions, enter
the amount from line 3. This is your MAC.
• If you had only elective deferrals, enter the
lesser of lines 3 or 17. This is your MAC.
• If you had both elective deferrals and
nonelective contributions, enter the amount from
line 3. This is your MAC. (Use the amount on line
17 to determine if you have excess elective
deferrals as explained in chapter 7.)
18.
$17,500
----------------------------------------------------------------------
5. Ministers and Church Employees
Self-employed ministers and church employees who participate in 403(b) plans generally follow the same rules as other 403(b) plan participants.
This means that if you are a self-employed minister or a church employee, your MAC generally is the lesser of:
• Your limit on annual additions, or
• Your limit on elective deferrals.
For most ministers and church employees, the limit on annual additions is figured without any changes. This means that if you are a minister or church employee, your limit on annual additions generally is the lesser of:
• $51,000 for 2013 and $52,000 for 2014, or
• Your includible compensation for your most recent year of service.
Although, in general, the same limit applies, church employees can choose an alternative limit and there are changes in how church employees, foreign missionaries, and self-employed ministers figure includible compensation for the most recent year of service. This chapter will explain the alternative limit and the changes.
Who is a church employee? A church employee is anyone who is an employee of a church or a convention or association of churches, including an employee of a tax-exempt organization controlled by or associated with a church or a convention or association of churches.
Alternative Limit for Church Employees
If you are a church employee, you can choose to use $10,000 a year as your limit on annual additions, even if your annual additions computed under the general rule is less.
Total contributions over your lifetime under this choice cannot be more than $40,000.
Changes to Includible Compensation for Most Recent Year of Service
There are two types of changes in determining includible compensation for the most recent year of service. They are:
• Changes in how the includible compensation of foreign missionaries and self-employed ministers is figured, and
• A change to the years that are counted when figuring the most recent year of service for church employees and self-employed ministers.
Changes to Includible Compensation
Includible compensation is figured differently for foreign missionaries and self-employed ministers.
Foreign missionary. If you are a foreign missionary, your includible compensation includes foreign earned income that may otherwise be excludable from your gross income under section 911.
If you are a foreign missionary, and your adjusted gross income is $17,000 or less, contributions to your 403(b) account will not be treated as exceeding the limit on annual additions if the contributions are not in excess of $3,000.
You are a foreign missionary if you are either a layperson or a duly ordained, commissioned, or licensed minister of a church and you meet both of the following requirements.
• You are an employee of a church or convention or association of churches.
• You are performing services for the church outside the United States.
Self-employed minister.
If you are a self-employed minister, you are treated as an employee of a tax-exempt organization that is a qualified employer. Your includible compensation is your net earnings from your ministry minus the contributions made to the retirement plan on your behalf and the deductible portion of your self-employment tax.
Changes to Years of Service
Generally, only service with the employer who maintains your 403(b) account can be counted when figuring your limit on annual additions.
Church employees. If you are a church employee, treat all of your years of service as an employee of a church or a convention or association of churches as years of service with one employer.
Self-employed minister. If you are a self-employed minister, your years of service include full and part years during which you were self-employed.
The most that can be contributed to your 403(b) account is the lesser of your limit on annual additions or your limit on elective deferrals.
If you will be age 50 or older by the end of the year, you may also be able to make additional catch-up contributions. These additional contributions cannot be made with after-tax employee contributions.
You are eligible to make catch-up contributions if:
• You will have reached age 50 by the end of the year, and
• The maximum amount of elective deferrals that can be made to your 403(b) account have been made for the plan year.
The maximum amount of catch-up contributions is the lesser of:
• $5,500 for 2013 and unchanged for 2014, or
• The excess of your compensation for the year, over the elective deferrals that are not catch-up contributions.
Figuring catch-up contributions.
When figuring allowable catch-up contributions, combine all catch-up contributions made by your employer on your behalf to the following plans.
• Qualified retirement plans. (To determine if your plan is a qualified plan, ask your plan administrator.)
• 403(b) plans.
• Simplified employee pension (SEP) plans.
• SIMPLE plans.
The total amount of the catch-up contributions on your behalf to all plans maintained by your employer cannot be more than the annual limit. For 2013 the limit is $5,500, unchanged for 2014.
CAUTION: If you are eligible for both the 15-year rule increase in elective deferrals and the age 50 catch-up, allocate amounts first under the 15-year rule and next as an age 50 catch-up.
TIP: Catch-up contributions do not affect your MAC. Therefore, the maximum amount that you are allowed to have contributed to your 403(b) account is your MAC plus your allowable catch-up contribution.
You can use Worksheet C in chapter 9 to figure your limit on catch-up contributions.
If your actual contributions are greater than your MAC, you have an excess contribution. Excess contributions can result in income tax, additional taxes, and penalties. The effect of excess contributions depends on the type of excess contribution. This chapter discusses excess contributions to your 403(b) account.
How Do I Know If I Have Excess Contributions?
At the end of the year or the beginning of the next year, you should refigure your MAC based on your actual compensation and actual contributions made to your account.
If the actual contributions to your account are greater than your MAC, you have excess contributions. If, at any time during the year, your employment status or your compensation changes, you should refigure your MAC using a revised estimate of compensation to prevent excess contributions.
What Happens If I Have Excess Contributions?
Certain excess contributions in a 403(b) account can be corrected. The effect of an excess 403(b) contribution will depend on the type of excess contribution.
Types of excess contributions. If, after checking your actual contributions, you determine that you have an excess, the first thing is to identify the type of excess that you have. Excess contributions to a 403(b) account are categorized as either an:
• Excess annual addition, or
• Excess elective deferral.
Excess Annual Addition
An excess annual addition is a contribution that is more than your limit on annual additions. To determine your limit on annual additions, see chapter 3 (chapter 5 for ministers or church employees).
In the year that your contributions are more than your limit on annual additions, the excess amount will be included in your income.
Excise Tax
If your 403(b) account invests in mutual funds, and you exceed your limit on annual additions, you may be subject to a 6% excise tax on the excess contribution. The excise tax does not apply to funds in an annuity account or to excess deferrals.
You must pay the excise tax each year in which there are excess contributions in your account. Excess contributions can be corrected by contributing less than the applicable limit in later years or by making permissible distributions. See chapter 8 for a discussion on permissible distributions.
You cannot deduct the excise tax.
Reporting requirement. You must file Form 5330 if there has been an excess contribution to a custodial account and that excess has not been corrected.
Excess Elective Deferral
An excess elective deferral is the amount that is more than your limit on elective deferrals. To determine your limit on elective deferrals, see chapter 4.
Your employer's 403(b) plan may contain language permitting it to distribute excess deferrals. If so, it may require that in order to get a distribution of excess deferrals, you either notify the plan of the amount of excess deferrals or designate a distribution as an excess deferral. The plan may require that the notification or designation be in writing and may require that you certify or otherwise establish that the designated amount is an excess deferral. A plan is not required to permit distribution of excess deferrals.
Correction of excess deferrals during year. If you have excess deferrals for a year, a corrective distribution may be made only if both of the following conditions are satisfied.
• The plan and either you or your employer designate the distribution as an excess deferral to the extent you have excess deferrals for the year.
• The correcting distribution is made after the date on which the excess deferral was made.
Correction of excess deferrals after the year.
If you have excess deferrals for a year, you may receive a correcting distribution of the excess deferral no later than April 15 of the following year. The plan can distribute the excess deferral (and any income allocable to the excess) no later than April 15 of the year following the year the excess deferral was made.
Tax treatment of excess deferrals not attributable to Roth contributions. If the excess deferral is distributed by April 15, it is included in your income in the year contributed and the earnings on the excess deferral will be taxed in the year distributed.
Tax treatment of excess deferrals attributable to Roth contributions. For these rules, see Regulations section 8. Distributions and Rollovers
Distributions
Permissible distributions. Generally, a distribution cannot be made from a 403(b) account until the employee:
• Reaches age 59 1/2,
• Has a severance from employment,
• Dies,
• Becomes disabled,
• In the case of elective deferrals, encounters financial hardship, or
• Has a qualified reservist distribution.
In most cases, the payments you receive or that are made available to you under your
403(b)account are taxable in full as ordinary income. In general, the same tax rules apply to distributions from 403(b) plans that apply to distributions from other retirement plans. These rules are explained in
Publication 575.
Publication 575also discusses the additional tax on early distributions from retirement plans.
Retired public safety officers. If you are an eligible retired public safety officer, distributions of up to $3,000, made directly from your 403(b) plan to pay accident, health, or long-term care insurance, are not included in your taxable income. The premiums can be for you, your spouse, or your dependents.
A public safety officer is a law enforcement officer, fire fighter, chaplain, or member of a rescue squad or ambulance crew.
For additional information, see Publication 575.
Distribution for active reservist. The 10% penalty for early withdrawals will not apply to a qualified reservist distribution attributable to elective deferrals from a 403(b) plan. A qualified reservist distribution is a distribution that is made:
• To an individual who is a reservist or national guardsman and who was ordered or called to active duty for a period in excess of 179 days or for an indefinite period; and
• During the period beginning on the date of the order or call to duty and ending at the close of the active duty period.
Minimum Required Distributions
You must receive all, or at least a certain minimum, of your interest accruing after 1986 in the 403(b) plan by April 1 of the calendar year following the later of the calendar year in which you become age 70 1/2, or the calendar year in which you retire.
TIP: Check with your employer, plan administrator, or provider to find out whether this rule also applies to pre-1987 accruals. If not, a minimum amount of these accruals must begin to be distributed by the later of the end of the calendar year in which you reach age 75 or April 1 of the calendar year following retirement. For each year thereafter, the minimum distribution must be made by the last day of the year. If you do not receive the required minimum distribution, you are subject to a nondeductible 50% excise tax on the difference between the required minimum distribution and the amount actually distributed.
No Special 10-Year Tax Option
A distribution from a 403(b) plan does not qualify as a lump-sum distribution. This means you cannot use the special 10-year tax option to calculate the taxable portion of a 403(b) distribution. For more information, see Publication 575.
Transfer of Interest in 403(b) Contract
Contract exchanges. If you transfer all or part of your interest from a 403(b) contract to another 403(b) contract (held in the same plan), the transfer is tax free, and is referred to as a contract exchange. This was previously known as a 90-24 transfer. A contract exchange is similar to a 90-24 transfer with one major difference. Previously, you were able to accomplish the transfer without your employer's involvement. After September 24, 2007, all such transfers are accomplished through a contract exchange requiring your employer's involvement. In addition, the plan must provide for the exchange and the transferred interest must be subject to the same or stricter distribution restrictions. Finally, your accumulated benefit after the exchange must be equal to what it was before the exchange.
Transfers that do not satisfy this rule are plan distributions and are generally taxable as ordinary income.
Plan-to-plan transfers. You may also transfer part or all of your interest from a 403(b) plan to another 403(b) plan if you are an employee of (or were formerly employed by) the employer of the plan to which you would like to transfer. Both the initial plan and the receiving plan must provide for transfers. Your accumulated benefit after the transfer must be at least equal to what it was before the transfer. The new plan's restrictions on distributions must be the same or stricter than those of the original plan.
Tax-free transfers for certain cash distributions. A tax-free transfer may also apply to a cash distribution of your 403(b) account from an insurance company that is subject to a rehabilitation, conservatorship, insolvency, or similar state proceeding. To receive tax-free treatment, you must do all of the following:
• Withdraw all the cash to which you are entitled in full settlement of your contract rights or, if less, the maximum permitted by the state.
• Reinvest the cash distribution in a single policy or contract issued by another insurance company or in a single custodial account subject to the same or stricter distribution restrictions as the original contract not later than 60 days after you receive the cash distribution.
• Assign all future distribution rights to the new contract or account for investment in that contract or account if you received an amount that is less than what you are entitled to because of state restrictions.
In addition to the preceding requirements, you must provide the new insurer with a written statement containing all of the following information:
• The gross amount of cash distributed under the old contract.
• The amount of cash reinvested in the new contract.
• Your investment in the old contract on the date you receive your first cash distribution.
Also, you must attach the following items to your timely filed income tax return in the year you receive the first distribution of cash.
1. A copy of the statement you gave the new insurer.
2. A statement that includes:
a. The words
ELECTION UNDER REV. PROC. 92-44,b. The name of the company that issued the new contract, and
c. The new policy number.
If you make a direct trustee-to-trustee transfer, from your governmental
403(b)account to a defined benefit governmental plan, it may not be includible in gross income.
The transfer amount is not includible in gross income if it is made to:
• Purchase permissive service credits, or
• Repay contributions and earnings that were previously refunded under a forfeiture of service credit under the plan, or under another plan maintained by a state or local government employer within the same state.
After-tax contributions.
For distributions beginning after December 31, 2006, after-tax contributions can be rolled over between a
403(b)plan and a defined benefit plan, IRA, or a defined contribution plan. If the rollover is to or from a 403(b) plan, it must occur through a direct trustee-to-trustee transfer.
Permissive service credit. A permissive service credit is credit for a period of service recognized by a defined benefit governmental plan only if you voluntarily contribute to the plan an amount that does not exceed the amount necessary to fund the benefit attributable to the period of service and the amount contributed is in addition to the regular employee contribution, if any, under the plan.
A permissive service credit may also include service credit for up to 5 years where there is no performance of service, or service credited to provide an increased benefit for service credit which a participant is receiving under the plan.
Check with your plan administrator as to the type and extent of service that may be purchased by this transfer.
Tax-Free Rollovers
You can generally roll over tax free all or any part of a distribution from a 403(b) plan to a traditional IRA or a non-Roth eligible retirement plan, except for any nonqualifying distributions, described later. You may also roll over any part of a distribution from a 403(b) plan by converting it through a direct rollover, described below, to a Roth IRA. Conversion amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. See Publication 590 for more information about conversion into a Roth IRA.
Note. A participant is required to roll over distribution amounts received within 60 days in order for the amount to be treated as nontaxable. Distribution amounts that are rolled over within the 60 days are not subject to the 10% early distribution penalty.
Rollovers to and from 403(b) plans. You can generally roll over tax free all or any part of a distribution from an eligible retirement plan to a 403(b) plan. Beginning January 1, 2008, distributions from tax-qualified retirement plans and tax-sheltered annuities can be converted by making a direct rollover into a Roth IRA subject to the restrictions that currently apply to rollovers from a traditional IRA into a Roth IRA. Converted amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. See Publication 590 for more information on conversion into a Roth IRA.
If a distribution includes both pre-tax contributions and after-tax contributions, the portion of the distribution that is rolled over is treated as consisting first of pre-tax amounts (contributions and earnings that would be includible in income if no rollover occurred). This means that if you roll over an amount that is at least as much as the pre-tax portion of the distribution, you do not have to include any of the distribution in income.
For more information on rollovers and eligible retirement plans, see Publication 575.
CAUTION: If you roll over money or other property from a 403(b) plan to an eligible retirement plan, see Publication 575 for information about possible effects on later distributions from the eligible retirement plan.
Hardship exception to rollover rules. The IRS may waive the 60-day rollover period if the failure to waive such requirement would be against equity or good conscience, including cases of casualty, disaster, or other events beyond the reasonable control of an individual.
To obtain a hardship exception, you must apply to the IRS for a waiver of the 60-day rollover requirement. You apply for the waiver by following the general instructions used in requesting a letter ruling. These instructions are stated in Revenue Procedure 2013-4, 2013-1 I.R.B. 126 available at http://www.irs.gov/irb/2013-01_IRB/ar09.html, or see the latest annual update. You must also pay a user fee with the application. The user fee for a rollover that is less than $50,000 is $500. For rollovers that are $50,000 or more, see Revenue Procedure 2013-8, 2013-1 I.R.B. 237 available at http://www.irs.gov/irb/2013-01_IRB/ar13.html, or see the latest annual update.
In determining whether to grant a waiver, the IRS will consider all relevant facts and circumstances, including:
1. Whether errors were made by the financial institution;
2. Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country, or postal error;
3. Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check); and
4. How much time has passed since the date of distribution.
For additional information on rollovers, see
Publication 590.
Eligible retirement plans. The following are considered eligible retirement plans.
• Individual retirement arrangements.
• Roth IRA.
• 403(b) plans.
• Government eligible 457 plans.
• Qualified retirement plans.
If the distribution is from a designated Roth account, then the only eligible retirement plan is another designated Roth account or a Roth IRA.
Nonqualifying distributions. You cannot roll over tax free:
• Minimum required distributions (generally required to begin at age 70 1/2),
• Substantially equal payments over your life or life expectancy,
• Substantially equal payments over the joint lives or life expectancies of your beneficiary and you,
• Substantially equal payments for a period of 10 years or more,
• Hardship distributions, or
• Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or excess annual additions and any allocable gains.
Rollover of nontaxable amounts.
You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another eligible retirement plan, traditional IRA, or Roth IRA. The transfer must be made either through a direct rollover to an eligible plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional IRA or Roth IRA.
If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution.
Direct rollovers of 403(b) plan distributions. You have the option of having your 403(b) plan make the rollover directly to a traditional IRA, Roth IRA, or new plan. Before you receive a distribution, your plan will give you information on this. It is generally to your advantage to choose this option because your plan will not withhold tax on the distribution if you choose it.
Distribution received by you. If you receive a distribution that qualifies to be rolled over, you can roll over all or any part of the distribution. Generally, you will receive only 80% of the distribution because 20% must be withheld. If you roll over only the 80% you receive, you must pay tax on the 20% you did not roll over. You can replace the 20% that was withheld with other money within the 60-day period to make a 100% rollover.
Voluntary deductible contributions. For tax years 1982 through 1986, employees could make deductible contributions to a 403(b) plan under the individual retirement arrangement (IRA) rules instead of deducting contributions to a traditional IRA.
If you made voluntary deductible contributions to a 403(b) plan under these traditional IRA rules, the distribution of all or part of the accumulated deductible contributions may be rolled over if it otherwise qualifies as a distribution you can roll over. Accumulated deductible contributions are the deductible contributions:
• Plus
• Income allocable to the contributions,
• Gain allocable to the contributions, and
• Minus
• Expenses and losses allocable to the contributions, and
• Distributions from the contributions, income, or gain.
The portion of a distribution from a
403(b)plan transferred to a traditional IRA that was previously included in income as excess employer contributions (discussed earlier) is not an eligible rollover distribution.
Its transfer does not affect the rollover treatment of the eligible portion of the transferred amounts. However, the ineligible portion is subject to the traditional IRA contribution limits and may create an excess IRA contribution subject to a 6% excise tax (see chapter 1 of Publication 590).
Qualified domestic relations order. You may be able to roll over tax free all or any part of an eligible rollover distribution from a 403(b) plan that you receive under a qualified domestic relations order (QDRO). If you receive the interest in the 403(b) plan as an employee's spouse or former spouse under a QDRO, all of the rollover rules apply to you as if you were the employee. You can roll over your interest in the plan to a traditional IRA or another 403(b) plan. For more information on the treatment of an interest received under a QDRO, see Publication 575.
Spouses of deceased employees. If you are the spouse of a deceased employee, you can roll over the qualifying distribution attributable to the employee. You can make the rollover to any eligible retirement plan.
After you roll money and other property over from a 403(b) plan to an eligible retirement plan, and you take a distribution from that plan, you will not be eligible to receive the capital gain treatment or the special averaging treatment for the distribution.
Second rollover. If you roll over a qualifying distribution to a traditional IRA, you can, if certain conditions are satisfied, later roll the distribution into another 403(b) plan. For more information, see IRA as a holding account (conduit IRA) for rollovers to other eligible plans in chapter 1 of Publication 590.
Nonspouse beneficiary. A nonspouse beneficiary may make a direct rollover of a distribution from a 403(b) plan of a deceased participant if the rollover is a direct transfer to an inherited IRA established to receive the distribution. If the rollover is a direct trustee-to-trustee transfer to an IRA established to receive the distribution:
• The transfer will be treated as an eligible rollover distribution.
• The IRA will be considered an inherited account.
• The required minimum distribution rules that apply in instances where the participant dies before the entire interest is distributed will apply to the transferred IRA.
For more information on IRAs, see
Publication 590.
Frozen deposits. The 60-day period usually allowed for completing a rollover is extended for any time that the amount distributed is a frozen deposit in a financial institution. The 60-day period cannot end earlier than 10 days after the deposit ceases to be a frozen deposit.
A frozen deposit is any deposit that on any day during the 60-day period cannot be withdrawn because:
1. The financial institution is bankrupt or insolvent, or
2. The state where the institution is located has placed limits on withdrawals because one or more banks in the state are (or are about to be) bankrupt or insolvent.
Gift Tax
If, by choosing or not choosing an election, or option, you provide an annuity for your beneficiary at or after your death, you may have made a taxable gift equal to the value of the annuity.
Joint and survivor annuity. If the gift is an interest in a joint and survivor annuity where only you and your spouse have the right to receive payments, the gift will generally be treated as qualifying for the unlimited marital deduction.
More information. For information on the gift tax, see Publication 559, Survivors, Executors, and Administrators.
Chapter 2 introduced you to the term maximum amount contributable (MAC). Generally, your MAC is the lesser of your:
• Limit on annual additions (chapter 3), or
• Limit on elective deferrals (chapter 4).
The worksheets in this chapter can help you figure the cost of incidental life insurance, your includible compensation, your limit on annual additions, your limit on elective deferrals, your limit on catch-up contributions, and your MAC.
After completing the worksheets, you should maintain them with your 403(b) records for that year. Do not attach them to your tax return. At the end of the year or the beginning of the next year, you should compare your estimated compensation figures with your actual figures.
If your compensation is the same as, or more than, the projected amounts and the calculations are correct, then you should simply file these worksheets with your other tax records for the year.
If your compensation was lower than your estimated figures, you will need to check the amount contributed during the year to determine if contributions are more than your MAC.
When Should I Figure MAC?
At the beginning of each year, you should figure your MAC using a conservative estimate of your compensation. Should your income change during the year, you should refigure your MAC based on a revised conservative estimate. By doing this, you will be able to determine if contributions to your 403(b) account should be increased or decreased for the year.
Checking the Previous Year's Contributions
At the beginning of the following year, you should refigure your MAC based on your actual earned income.
At the end of the current year or the beginning of the next year, you should check your contributions to be sure you did not exceed your MAC. This means refiguring your limit based on your actual compensation figures for the year. This will allow you to determine if the amount contributed is more than the allowable amounts, and possibly avoid additional taxes.
Available Worksheets
The following worksheets have been provided to help you figure your MAC.
• Worksheet A. Cost of Incidental Life Insurance.
• Worksheet B. Includible Compensation for Your Most Recent Year of Service
• Worksheet C. Limit on Catch-Up Contributions.
• Worksheet 1. Maximum Amount Contributable (MAC).
Worksheet A. Cost of Incidental Life Insurance
Note. Use this worksheet to figure the cost of incidental life
insurance included in your annuity contract. This amount will be used
to figure includible compensation for your most recent year of
service.
----------------------------------------------------------------------
1.
Enter the value of the contract (amount payable upon
your death)
1.
______
2.
Enter the cash value in the contract at the end of the
year
2.
______
3.
Subtract line 2 from line 1. This is the value of your
current life insurance protection
3.
______
4.
Enter your age on your birthday nearest the beginning of
the policy year
4.
______
5.
Enter the 1-year term premium for $1,000 of life
insurance based on your age. (From Figure 3-1)
5.
______
6.
Divide line 3 by $1,000
6.
______
7.
Multiply line 6 by line 5. This is the cost of your
incidental life insurance
7.
______
----------------------------------------------------------------------
Worksheet B. Includible Compensation for Your Most Recent Year of Service1
Note. Use this worksheet to figure includible compensation for your
most recent year of service.
----------------------------------------------------------------------
1.
Enter your ineligible wages from the employer
maintaining your 403(b) account for your most recent
year of service.
1.
______
2.
Enter elective deferrals excluded from your gross
income for your most recent year of service
2
2.
______
3.
Enter amounts contributed or deferred by your employer
under a cafeteria plan for your most recent year of
service
3.
______
4.
Enter amounts contributed or deferred by your employer
according to your election to your 457 account (a
nonqualified plan of a state or local government or of
a tax-exempt organization) for your most recent year
of service
4.
______
5.
Enter pre-tax contributions (employer's contributions
made on your behalf according to your election) to a
qualified transportation fringe benefit plan for your
most recent year of service
5.
______
6.
Enter your foreign earned income exclusion for your
most recent year of service
6.
______
7.
Add lines 1, 2, 3, 4, 5, and 6
7.
______
8.
Enter the cost of incidental life insurance that is
part of your annuity contract for your most recent
year of service
8.
______
9.
Enter compensation that was
both:
• Earned during your most recent year of service, and
• Earned while your employer was not qualified to
maintain a 403(b) plan
9.
______
10.
Add lines 8 and 9
10.
______
11.
Subtract line 10 from line 7. This is your includible
compensation for your most recent year of service
11.
______
----------------------------------------------------------------------
1
Use estimated amounts if figuring includible compensation before the
end of the year.
2
Elective deferrals made to a designated Roth account are not
excluded from your gross income and should not be included on line.
======================================================================
Worksheet C. Limit on Catch-Up Contributions
Note. If you will be age 50 or older by the end of the year, use this
worksheet to figure your limit on catch-up contributions.
----------------------------------------------------------------------
1.
Maximum catch-up contributions
1.
$5,500
2.
Enter your includible compensation for your most recent
year of service
2.
______
3.
Enter your elective deferrals
3.
______
4.
Subtract line 3 from line 2
4.
______
5.
Enter the lesser of line 1 or line 4. This is your limit
on catch-up contributions
5.
______
----------------------------------------------------------------------
Worksheet 1. Maximum Amount Contributable (MAC)
Note. Use this worksheet to figure your MAC.
----------------------------------------------------------------------
Part I. Limit on Annual Additions
1.
Enter your includible compensation for your most
recent year of service
1.
_______
2.
Maximum
1
:
• For 2013, enter $51,000
• For 2014, enter $52,000
2.
_______
3.
Enter the lesser of line 1 or line 2. This is your
limit on annual additions
3.
_______
Caution:
If you had only nonelective contributions,
skip Part II and enter the amount from line 3 on
line 18.
Part II. Limit on Elective Deferrals
4.
Maximum contribution:
• For 2013, enter $17,500
• For 2014, enter $17,500
4.
_______
Note.
If you have at least 15 years of service with a
qualifying organization, complete lines 5 through 17.
If not, enter zero (-0-) on line 16 and go to line
17.
5.
Amount per year of service
5.
$5,000
6.
Enter your years of service
6.
_______
7.
Multiply line 5 by line 6
7.
_______
8.
Enter the total of all elective deferrals made for
you by the qualifying organization for prior years
8.
_______
9.
Subtract line 8 from line 7. If zero or less, enter
zero (-0-)
9.
_______
10.
Maximum increase in limit for long service
10.
$15,000
11.
Enter the total of additional pre-tax elective
deferrals made in prior years under the 15-year rule
11.
_______
12.
Enter the aggregate amount of all designated Roth
contributions permitted for prior years under the
15-year rule
12.
_______
13.
Add line 11 and line 12
13.
_______
14.
Subtract line 13 from line 10
14.
_______
15.
Maximum additional contributions
15.
$3,000
16.
Enter the least of lines 9, 14, or 15. This is your
increase in the limit for long service
16.
_______
17.
Add lines 4 and 16. This is your limit on elective
deferrals
17.
_______
Part III. Maximum Amount Contributable
18.
• If you had only nonelective contributions, enter
the amount from line 3. This is your MAC.
• If you had only elective deferrals, enter the
lesser of lines 3 or 17. This is your MAC.
• If you had both elective deferrals and nonelective
contributions, enter the amount from line 3. This
is your MAC. (Use the amount on line 17 to
determine if you have excess elective deferrals as
explained in chapter 7
18.
_______
1
If you participate in a 403(b) plan and a qualified plan, you must
combine contributions made to your 403(b) account with contributions
to a qualified plan and simplified employee pension plans of all
corporations, partnerships, and sole proprietorships in which you
have more than 50% control. You must also combine the contributions
made to all 403(b) accounts on your behalf by your employer.
======================================================================
10. Retirement Savings Contributions Credit (Saver's Credit)
If you or your employer make eligible contributions (defined later) to a retirement plan, you may be able to take a credit 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.
Can you claim the credit? If you or your employer make eligible contributions to a retirement plan, you can claim the credit if all of the following apply.
1. You are not under age 18.
2. You are not a full-time student (explained next).
3. No one else, such as your parent(s), claims an exemption for you on their tax return.
4. Your adjusted gross income (defined later) is not more than:
a. $59,000 for 2013 ($60,000 for 2014) if your filing status is married filing jointly,
b. $44,250 for 2013 ($45,000 for 2014) if your filing status is head of household (with qualifying person), or
c. $29,500 for 2013 ($30,000 for 2014) if your filing status is single, married filing separately, or qualifying widow(er) with dependent child.
You are a full-time student if, during some part of each of 5 calendar months (not necessarily consecutive) during the calendar year, you are either:
• A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or
• A student taking a full-time, on-farm training course given by either a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or a state, county, or local government.
You are a full-time student if you are enrolled for the number of hours or courses the school considers to be full-time.
Adjusted gross income. This is generally the amount on line 38 of your 2013 Form 1040 or line 22 of your 2013 Form 1040A. However, you must add to that amount any exclusion or deduction claimed for the year for:
• Foreign earned income,
• Foreign housing costs,
• Income for bona fide residents of American Samoa, and
• Income from Puerto Rico.
Eligible contributions.
These include:
1. Contributions to a traditional or Roth IRA,
2. Elective deferrals, including amounts designated as after-tax Roth contributions, to:
a. A
401(k)plan (including a SIMPLE 401(k)),
b. A section 403(b) annuity,
c. An eligible deferred compensation plan of a state or local government (a governmental 457 plan),
d. A SIMPLE IRA plan, or
e. A salary reduction SEP, and
3. Contributions to a section
plan.
They also include voluntary after-tax employee contributions to a tax-qualified retirement plan or a section
403(b)annuity. For purposes of the credit, an employee contribution will be voluntary as long as it is not required as a condition of employment.
Reducing eligible contributions. Reduce your eligible contributions (but not below zero) by the total distributions you received during the testing period (defined later) from any IRA, plan, or annuity included earlier under Eligible contributions. Also reduce your eligible contributions by any distribution from a Roth IRA that is not rolled over, even if the distribution is not taxable.
Do not reduce your eligible contributions by any of the following:
1. The portion of any distribution which is not includible in income because it is a trustee-to-trustee transfer or a rollover distribution.
2. Any distribution that is a return of a contribution to an IRA (including a Roth IRA) made during the year for which you claim the credit if:
a. The distribution is made before the due date (including extensions) of your tax return for that year,
b. You do not take a deduction for the contribution, and
c. The distribution includes any income attributable to the contribution.
3. Loans from a qualified employer plan treated as a distribution.
4. Distributions of excess contributions or deferrals (and income attributable to excess contributions and deferrals).
5. Distributions of dividends paid on stock held by an employee stock ownership plan under section 404(k).
6. Distributions from an eligible retirement plan that are converted or rolled over to a Roth IRA.
7. Distributions from a military retirement plan.
Distributions received by spouse.
Any distributions your spouse receives are treated as received by you if you file a joint return with your spouse both for the year of the distribution and for the year for which you claim the credit.
Testing period. The testing period consists of:
• The year in which you claim the credit,
• The 2 years before the year in which you claim the credit, and
• The period after the end of the year in which you claim the credit and before the due date of the return (including extensions) for filing your return for the year in which you claimed the credit.
Example.
You and your spouse filed joint returns in 2011 and 2012, and plan to do so in 2013 and 2014. You received a taxable distribution from a qualified plan in 2011 and a taxable distribution from an eligible section
457(b)deferred compensation plan in 2012. Your spouse received taxable distributions from a Roth IRA in 2013 and tax-free distributions from a Roth IRA in 2014 before April 15. You made eligible contributions to an IRA in 2013 and you otherwise qualify for this credit. You must reduce the amount of your qualifying contributions in 2013 by the total of the distributions you and your spouse received in 2011, 2012, 2013, and 2014.
Maximum eligible contributions. After your contributions are reduced, the maximum annual contribution on which you can base the credit is $2,000 per person.
Effect on other credits. The amount of this credit will not change the amount of your refundable tax credits. A refundable tax credit, such as the earned income credit or the additional child tax credit, is an amount that you would receive as a refund even if you did not otherwise owe any taxes.
Maximum credit. This is a nonrefundable credit. The amount of the credit in any year cannot be more than the amount of tax that you would otherwise pay (not counting any refundable credits or the adoption credit) in any year. If your tax liability is reduced to zero because of other nonrefundable credits, such as the education credits, then you will not be entitled to this credit.
How to figure and report the credit. The amount of the credit you can get is based on the contributions you make and your credit rate. The credit rate can be as low as 10% or as high as 50%. Your credit rate depends on your income and your filing status. See Form 8880, Credit for Qualified Retirement Savings Contributions, to determine your credit rate.
The maximum contribution taken into account is $2,000 per person. On a joint return, up to $2,000 is taken into account for each spouse.
Figure the credit on Form 8880. Report the credit on line 50 of your Form 1040 or line 32 of your Form 1040A, and attach Form 8880 to your return.
Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you.
Free help with your tax return. You can get free help preparing your return nationwide from IRS-certified volunteers. The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS.gov, download the IRS2Go app, or call 1-800-906-9887.
As part of the TCE program, AARP offers the Tax-Aide counseling program. To find the nearest AARP Tax-Aide site, visit AARP's website at http://www.aarp.org/money/taxaide or call 1-888-227-7669. For more information on these programs, go to IRS.gov and enter "VITA" in the search box.
Internet. IRS.gov and IRS2Go are ready when you are --24 hours a day, 7 days a week.
• Download the free IRS2Go app from the iTunes app store or from Google Play. Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs.
• Check the status of your 2013 refund with the Where's My Refund? application on IRS.gov or download the IRS2Go app and select the Refund Status option. The IRS issues more than 9 out of 10 refunds in less than 21 days. Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day.
• Use the Interactive Tax Assistant (ITA) to research your tax questions. No need to wait on the phone or stand in line. The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. When you reach the response screen, you can print the entire interview and the final response for your records. New subject areas are added on a regular basis.
Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS.gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. You can use the IRS Tax Map, to search publications and instructions by topic or keyword. The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics.
• Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. You can also ask the IRS to mail a return or an account transcript to you. Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS.gov or by calling 1-800-908-9946. Tax return and tax account transcripts are generally available for the current year and the past three years.
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• Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS.
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• Check the status of your amended return using Where's My Amended Return? Go to IRS.gov and enter Where's My Amended Return? in the search box. You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. It can take up to 3 weeks from the date you mailed it to show up in our system.
• Make a payment using one of several safe and convenient electronic payment options available on IRS.gov. Select the Payment tab on the front page of IRS.gov for more information.
• Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today.
• Figure your income tax withholding with the IRS Withholding Calculator on IRS.gov. Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld.
• Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS.gov.
• Request an Electronic Filing PIN by going to IRS.gov and entering Electronic Filing PIN in the search box.
• Download forms, instructions and publications, including accessible versions for people with disabilities.
• Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS.gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. An employee can answer questions about your tax account or help you set up a payment plan. Before you visit, check the Office Locator on IRS.gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. If you have a special need, such as a disability, you can request an appointment. Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service.
• Apply for an Employer Identification Number (EIN). Go to IRS.gov and enter Apply for an EIN in the search box.
• Read the Internal Revenue Code, regulations, or other official guidance.
• Read Internal Revenue Bulletins.
• Sign up to receive local and national tax news and more by email. Just click on "subscriptions" above the search box on IRS.gov and choose from a variety of options.
Phone.
You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Download the free IRS2Go app from the iTunes app store or from Google Play.
• Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS.gov, or download the IRS2Go app. Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Most VITA and TCE sites offer free electronic filing. Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location.
• Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. The IRS issues more than 9 out of 10 refunds in less than 21 days. Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Note, the above information is for our automated hotline. Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return.
• Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. It can take up to 3 weeks from the date you mailed it to show up in our system.
• Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). You should receive your order within 10 business days.
• Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. If, between January and April 15, you still have questions about the 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040.
• Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. These individuals can also contact the IRS through relay services such as the Federal Relay Service.
Walk-in.
You can find a selection of forms, publications and services -- in-person.
• Products. You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs.
• Services. You can walk in to your local TAC for face-to-face tax help. An employee can answer questions about your tax account or help you set up a payment plan. Before visiting, use the Office Locator tool on IRS.gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided.
Mail.
You can send your order for forms, instructions, and publications to the address below. You should receive a response within 10 business days after your request is received.
Internal Revenue Service 1201 N. Mitsubishi Motorway Bloomington, IL 61705-6613
The Taxpayer Advocate Service Is Here to Help You. The Taxpayer Advocate Service (TAS) is your voice at the IRS. Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights.
What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and:
• Your problem is causing financial difficulties for you, your family, or your business.
• You face (or your business is facing) an immediate threat of adverse action.
• You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised.
If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Here's why we can help:
• TAS is an independent organization within the IRS.
• Our advocates know how to work with the IRS.
• Our services are free and tailored to meet your needs.
• We have offices in every state, the District of Columbia, and Puerto Rico.
How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at
Taxpayer Advocate,or call us toll-free at 1-877-777-4778.
How else does TAS help taxpayers?
TAS also works to resolve large-scale, systemic problems that affect many taxpayers. If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System.
Low Income Taxpayer Clinics. Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List.
- Institutional AuthorsInternal Revenue Service
- Jurisdictions
- LanguageEnglish
