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mccook27

Payroll Deductions

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Does anyone know if for example I earn $2,000.00 gross per pay period and then contribute $200.00 to a 457 plan per pay period thereby lowering my taxable gross to $1,800.00 if I will owe Illinois State Taxes (3%), Medicare Taxes (1.45%) and Police Pension Contributions (9.91%) on my regular gross of 2,000.00 or will I owe taxes based on the lowered taxable gross of 1,800.00 ??

 

I am aware that federal taxes will be calculated on the taxable gross of 1,800.00 but I am not sure if the other taxes I mentioned will be computed on the higher gross or the lower gross as a result of my participation in the 457 plan.

 

I am police officer in Illinois and work for a local municipality. Any help would be appreciated.

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Hi McCook27-

 

I can't answer your Illinois-specific aspects, but the FICA-Medicare withholding of 1.45% will apply to the full amount before the 457 deferral. In your example, $29 per pay period would be withheld for FICA-Medicare based on (0.0145 multiplied by 2000).

 

According to url

 

http://www.revenue.state.il.us/Businesses/.../individual.htm

 

you may call

 

1 800 732-8866 or 1 217 782-3336 with questions regarding the proper amount of Illinois withholding on your paycheck with respect to your 457 tax deferred income.

 

Best wishes,

 

RTS

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The Illinois Income tax should not apply. It is based on Federal adjusted gross income, and there is no adjustment up for 457 contributions. Distributions may be nontaxable, but the relevant provision is by no means clear.

 

On the pension contribution, it looks like there is no reduction.

 

The best places to go for hard answers are (1) your union or police association, (2) the people running the 457 and (3) an accountant who does policemens' tax returns.

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Guest Sierra

A fourth place to go for hard answers is the Illinois Division of Taxation. Let us know the answers.

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