Church as Facilitator to Pastor Contributions to a Traditional IRA Account

To contact us Click HERE
Question:

Is there any reason a church could not make deposits to anIRA account for its pastor? It is understood that any deposits would have to bereported as income on Form W-2, but other than that, is there any problem?Also, how much of a monthly contribution would be necessary for a 403(b) to beworth the trouble to set up?Answer:

Usually it is the responsibility of the minister to makecontributions to his IRA himself and take a deduction when he files hispersonal returns. But there is no restriction to assist in payroll deductionsfor any purpose as long as they are handled correctly on Form W-2 (as issuggested in the Question). Many ministers do not use traditional IRA planssince Internal Revenue Code section 403(b) and Roth IRA plans are available.Self-employment tax is not assessed on contributions to Church Plans (IRS Revenue Rulings 68-395 and 78-6) which it isbelieved to include 403(b) plans. It is our experience that most investment firms thatsponsor 403(b) plans require minimum monthly contributions. Fees to establishand to contribute to these plans must be weighed against the tax benefits.

The members of my Federal Taxation I class at MaranathaBaptist Bible College in Watertown, Wisconsin have taken on the challenge ofstudy and research to answer posted questions. Leslie Harrison of Michigan gets creditfor this one.