Jump to content
eagle1

457 B Exemptions And Md

Recommended Posts

I have a client who insist that his 457b contributions is exempt from state taxes.All the research with state and my payroll vendor says it is not exempt from state taxes.Any thoughts?

Share this post


Link to post
Share on other sites

The money is tax deferred not exempted from state or federal taxes.

 

 

 

No state taxes if one relocates to a state w/o a State Income Tax and takes distributions after establishing residency in that locale. 13 states in US have no income tax, I believe.

Share this post


Link to post
Share on other sites

To clarify (assuming you have not over-contributed in any year):

 

1. Money going into the plan ("Contributions"): These amounts will not be counted on the employees' W-2 box 1. Two examples:

 

Employee A makes $50,000 in 2007 and elected to defer $5,000 from that pay into the 457(b) plan. When employee A does their Form 1040 for 2007, their Box 1 will only show $45,000 (not $50,000).

 

Employee B makes $80,000 in 2007 and their employer agreed to contribute $8,000 into the 457(b) plan on their behalf. I will ignore FICA taxes to make the math easy. When employee B does their Form 1040 for 2007, their Box 1 will only show $80,000 (not $88,000).

 

The amounts contributed to the plan are subject to same Employer and Employee FICA taxes that apply to regular wages (FICA withholding for the employee, and matching FICA for the Employer). That also means: if the Employer overall is not participating in Social Security (because they took advantage of an opt out program some time ago), then the 457(b) contributions are also not subject to FICA.

 

2. Money going out of the plan ("Distributions"): These amounts are taxable. If the employer sponsoring the plan is a government, a Form 1099-R will report the distribution (taxable unless rolled over). If the employer is a tax-exempt entity (non-profit corp.), then the 457(b) account gets reported on a Form W-2 as regular wage income - and this time it's taxable when constructive receipt has occurred, which can be earlier than the date it is paid out -but that can be delayed if the proper steps are handled timely).

 

I hope this helps.

Share this post


Link to post
Share on other sites

I have a client who insist that his 457b contributions is exempt from state taxes.All the research with state and my payroll vendor says it is not exempt from state taxes.Any thoughts?

 

 

Some states (e.g. NY, NJ) exempt state retirement benefits from state income tax. In addition some retirement benefits paid to non residents cannot not be taxed by the state where the benefits were earned.

Share this post


Link to post
Share on other sites

Ah, yes - good point. Yes, the distributions are taxable as income at the state level unless of course the state has a specific exemption for that type of distribution.

 

Thanks intruder!

Share this post


Link to post
Share on other sites
Guest Sierra

I have a client who insist that his 457b contributions is exempt from state taxes.All the research with state and my payroll vendor says it is not exempt from state taxes.Any thoughts?

 

 

You want us to help you yet you do not give us the name of the state.

 

Having said that, you go on to tell us that you researched the question and got your answer that the state does tax 457 contributions. So your client is evidently wrong. No?

 

Joel L. Frank

 

Share this post


Link to post
Share on other sites
Guest Sierra

 

I have a client who insist that his 457b contributions is exempt from state taxes.All the research with state and my payroll vendor says it is not exempt from state taxes.Any thoughts?

 

 

Some states (e.g. NY, NJ) exempt state retirement benefits from state income tax. In addition some retirement benefits paid to non residents cannot not be taxed by the state where the benefits were earned.

 

 

Intruder:

 

Your response to eagle1 is a prime example of how you do not focus on the question. You do this all the time and it is quite annoying. I believe you do this in order to show us all just how much you know. You must have an inferiority complex.

 

Having said that, the question deals with the current taxation of contributions, not the taxation of withdrawals or benefits during retirement. You are one big pain/annoyance!!

 

Joel L. Frank

Share this post


Link to post
Share on other sites

 

 

I have a client who insist that his 457b contributions is exempt from state taxes.All the research with state and my payroll vendor says it is not exempt from state taxes.Any thoughts?

 

 

Some states (e.g. NY, NJ) exempt state retirement benefits from state income tax. In addition some retirement benefits paid to non residents cannot not be taxed by the state where the benefits were earned.

 

 

Intruder:

 

Your response to eagle1 is a prime example of how you do not focus on the question. You do this all the time and it is quite annoying. I believe you do this in order to show us all just how much you know. You must have an inferiority complex.

 

Having said that, the question deals with the current taxation of contributions, not the taxation of withdrawals or benefits during retirement. You are one big pain/annoyance!!

 

Joel L. Frank

 

 

And what provision of MD income tax law taxes contributions to a 457(b) plan? Please provide the cite.

 

Share this post


Link to post
Share on other sites
Guest Sierra

And what provision of MD income tax law taxes contributions to a 457(b) plan? Please provide the cite.

 

 

Assuming eagle is using md to stand for minimum distributions, "minimum distribution" or "benefits" is no where to be found in the body of his question. His question was limited to taxation of contributions. No? Your inferiority complex commanded you to tell us about the taxation of withdrawals/distributions/benefits. You are one big annoyance.......please confine your answers to the questions.

Share this post


Link to post
Share on other sites
Guest Sierra

 

I have a client who insist that his 457b contributions is exempt from state taxes.All the research with state and my payroll vendor says it is not exempt from state taxes.Any thoughts?

 

 

Some states (e.g. NY, NJ) exempt state retirement benefits from state income tax.

 

 

In NY only the state admininstered pension system benefit is 100 percent exempt from the state income tax. The 457/403b/401(k) contribution is tax deferred while only the first 20K of 457/403b/401k income is exempt from the state income tax.

 

In NJ only the first 20k of a state administered pension system benefit is tax exempt. Only 401k contributions are tax deferred. All other salary reduction plan contributions are taxed (457b/403(b). So in retirement all 401k distributions are fully taxable. In retirement, inasmuch as the 457/403b contribution was previously taxed that portion of the distribution that is a recovery of the contribution is received tax free while the balance (gain) is fully taxable.

 

Joel L. Frank

Pension Columnist

The Chief-Civil Service Leader

277 Broadway

New York, NY 10007

 

 

 

Share this post


Link to post
Share on other sites
Guest Sierra

Here is another recent example of how 'Intruder' makes a categorically erroneous statement and then when he/she is summarily corrected decides NOT to acknowledge that he/she stands corrected.

 

Peace and hope,

Joel

=====================================================================

 

 

 

 

I have a client who insist that his 457b contributions is exempt from state taxes.All the research with state and my payroll vendor says it is not exempt from state taxes.Any thoughts?

 

 

Some states (e.g. NY, NJ) exempt state retirement benefits from state income tax.

 

 

In NY only the state administered pension system benefit is 100 percent exempt from the state income tax. The 457/403b/401(k) contribution is tax deferred while only the first 20K of 457/403b/401k income is exempt from the state income tax.

 

In NJ only the first 20k of a state administered pension system benefit is tax exempt. Only 401k contributions are tax deferred. All other salary reduction plan contributions are taxed (457b/403(b). So in retirement all 401k distributions are fully taxable. In retirement, inasmuch as the 457/403b contribution was previously taxed that portion of the distribution that is a recovery of the contribution is received tax free while the balance (gain) is fully taxable.

 

Joel L. Frank

Pension Columnist

The Chief-Civil Service Leader

277 Broadway

New York, NY 10007

 

Share this post


Link to post
Share on other sites
Guest Sierra

Intruder:

 

I respectfully request that you step up to the plate and admit that you stand corrected. Do you have the courage to do so?

 

Joel L. Frank

 

Here is another recent example of how 'Intruder' makes a categorically erroneous statement and then when he/she is summarily corrected decides NOT to acknowledge that he/she stands corrected.

 

Peace and hope,

Joel

=====================================================================

 

I have a client who insist that his 457b contributions is exempt from state taxes.All the research with state and my payroll vendor says it is not exempt from state taxes.Any thoughts?

 

Some states (e.g. NY, NJ) exempt state retirement benefits from state income tax.

 

In NY only the state administered pension system benefit is 100 percent exempt from the state income tax. The 457/403b/401(k) contribution is tax deferred while only the first 20K of 457/403b/401k income is exempt from the state income tax.

 

In NJ only the first 20k of a state administered pension system benefit is tax exempt. Only 401k contributions are tax deferred. All other salary reduction plan contributions are taxed (457b/403(b). So in retirement all 401k distributions are fully taxable. In retirement, inasmuch as the 457/403b contribution was previously taxed that portion of the distribution that is a recovery of the contribution is received tax free while the balance (gain) is fully taxable.

 

Joel L. Frank

Pension Columnist

The Chief-Civil Service Leader

277 Broadway

New York, NY 10007

 

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

×
×
  • Create New...