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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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IAM a pastor having worked in my church years. During this

Customer Question

IAM a pastor having worked in my church for 19 years. During this time no provision was made my my church for retirement. I am preparing to finally retire at 73 years old and the church wants to fund an annuity to provide an income for that retirement. Is there an IRS formula to determine how much they can put into that account, and what tax consequence would that have on me
Submitted: 4 months ago.
Category: Tax
Expert:  Lev replied 4 months ago.

Your employer (the church) may make contribution into your retirement plan - and that contribution is limited by 25% of your compensation for the tax year.
That limit is separately applied to each tax year.
For instance - if your wages are $40,000 - the employer may contribute up to $10,000

In additional - if there are several employees - employer's contributions generally must be the same for all employees.


In additional to employer's contribution - you as an employee may make your own elective contribution out of wages.
These contributions are also limited on the annual basis and depends on the type of retirement plan your employer would establish.

Normally - tax exempt organization are using 403(b) Tax-Sheltered Annuity establishing retirement plans for employees - here is some additional information you may find helpful:


Customer: replied 4 months ago.
Clarification, the church is trying to make up for 19 years of no contributions to my retirement, with one lump sume in to an annuity. How much can that lump sume be and do I pay taxes on the lump sum or just monthly income resulting from it.
Expert:  Lev replied 4 months ago.

Contribution to the annuity in your name by your employer will be reported as your wages - and will be YOUR taxable income.

Expert:  Lev replied 4 months ago.

You will be ONLY able to defer from tax liability contribution within the annual limit.

That is 25% of your annual compensation or $53,000 - whatever is less.

Only current year compensation is considered for deferral - we may not count prior years.

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