|
|
|
|
|
Envoy Financial is pleased to now offer low cost term life insurance at unbelievable rates. Life insurance is a critical component of any financial stewardship plan. Take action today to help ensure the financial protection of your loved ones! For a free instant quote, click this link: Envoy Quick Quote - Low Cost Term Life Insurance. |
|
Ministry
Leader, Taxation: Accumulation
during working years, distribution at and during retirement Roth 403(b) a win for many service personnel "Retirement is not only a reward for past service, but also a stepping-stone to future service." Executive
Summary:
Resources: IRS publication: Publication 517, Social Security and Other Information for the Members of the Clergy and Religious Workers Section
107 of the Internal Revenue Code
Introduction: Service
leaders and those who serve them are faced with a unique set of tax and
administrative issues when dealing with 403(b) retirement savings
plans, "Future-Funded Service" plans. The
following issues impact all those who are licensed or commissioned:
Our
objective is to detail how these issues can be addressed within the
403(b) Retirement Plan context. 1.
Housing
Allowance during active years is a positive benefit for service leaders: "A
housing allowance, sometimes called a rental allowance, is excludable
from gross income for income tax purposes, but not for self-employment
tax purposes." Whether
he/she owns or rents a home, it is essential that his or her employing
organization designate a housing allowance. Housing
allowances should be: 1.
Adopted by the organization board or leadership, 2.
Recorded in written form (such as minutes); and 3.
Designated in advance of the calendar year. However,
organizations that fail to designate an allowance in advance of a
calendar year should do so as soon as possible in the New Year. The allowance will operate prospectively. The
housing allowance is an exclusion from income permitted by Section 107
of the Internal Revenue Code. It is not a
deduction. In other words, a housing
allowance is money that is not reported as income. A
housing allowance is never deducted because it is never reported as
income in the first place. However,
you are required to include any excess housing allowance as income on
your Form 1040. 2.
What is the impact of a housing allowance on
retirement plan distributions? Under
certain denominational plans and those established specifically to
protect the value of the housing allowance, 403(b)(9) retirement plan
distributions may be taken as part of the ongoing housing allowance. This
means that the taxable amount of any 403(b) retirement distribution is
reduced dollar-for-dollar by the amount of your designated housing
allowance. For example, if the annual
distribution is $7,000 and the housing allowance is $3,000, the amount
of the taxable income will be $4,000. 3.
Full and
clear 1099-R reporting makes tax reporting easy. Using
the prior example, Envoy has arranged for this information to be
reported on the 1099-R that is issued for the distribution showing
$4,000 as taxable distribution, while $3,000 is allocated from the
housing allowance. The procedure for
implementing this process is as follows:
Protecting
the value of the retiree's housing allowance is a top priority for
Envoy and Lincoln Investment Planning, Inc. Envoy
is one of the few organizations that make it possible for the retiree
to ensure the tax-reduced distribution from their 403(b) plan is
protected. Please note, that if monies are
transferred to any other retirement plan vehicle, this tax benefit will
be lost. 1.
Roth
403(b) is a good choice for many with Service Leadership status In
2006, the Roth 403(b) option became another way for people to save for
retirement by contributing dollars after-tax, and experiencing tax-free
growth and distribution at retirement. (All
normal Roth requirements apply.) A
Roth 403(b) contribution option, when added to a traditional 403(b)
Plan, has benefits for many with this status. The
combination of regular personal tax exemptions coupled with either
itemized deductions or standard deduction and a housing allowance often
results in a very low tax situation, perhaps even zero.
Providing a tax advantaged investment alternative where
the earnings grow tax-free and the distribution is the same, has great
appeal for many with this status. As noted
above, the Roth 403(b) contributions also reduce the SECA tax payment
required. 2.
Payment
of SECA taxes on Voluntary or Employee 403(b) contributions: The
SECA tax owed by those with this status is reduced by the amount
contributed to either a traditional or Roth 403(b) plan. Again, this is
only true for those with this status. Envoy
is committed to protecting and ensuring that your tax and retirement
plan benefits are truly there for you during your active service years
and beyond. Addendums: Sample
Housing Allowance Forms: Three
sample Housing Allowance forms:
For more information and assistance regarding housing allowance, contact Client Services at (888) 879-1376, opt. 1 or by email at envoy@envoyfinancial.org. Our passion is to serve you! Sincerely,
This
message was sent to you because of your relationship with Envoy
Financial. If you no longer wish to receive these messages, please
click here. |
|
