January 22, 2009

W-2 Reporting of Church Contributions to 403(b) Plans

Question:

When a church contributes a nonelective contribution (see definition in IRS Publication 571) each month to a pastor's 403(b) account that is not tied to the salary and is not Roth related, how is it reported on a W-2?

Answer:

As long as the contributions are made in accordance with a qualified plan (the investment firm can tell you whether the plan is set up to receive employer contributions of this nature), then there is no Form W-2 disclosure other than to check the "Retirement" box indicating that he has an employer plan.

4 comments:

  1. What would be the reporting rule if the church wrote the check directly to the minister rather than to a financial institution?

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  2. Writing the check directly to the pastor results in taxable income reportable as Compensation in Box 1 of Form W-2.

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  3. In this case, can the pastor then write a check to his 403b, in which case it would be deducted from his Gross Wages Box 1?

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  4. IRC 403(b) plans are employer plans. Contributions by the employer (church) are made 1) from amounts withheld from its employees (called "elective deferrals") or 2) from its own church budget as a employee benefit. The pastor should not / cannot make a direct contribution.

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