Publication 571 - Introductory Material
This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Hurricane Katrina relief provisions. New rules provide for tax-favored withdrawals, repayments and loans from certain retirement plans (including 403(b) annuity
contracts for taxpayers
who suffered economic losses as a result of Hurricane Katrina, Rita, or Wilma. See Publication 4492 for details.
Limit on elective deferrals. For 2005, the limit on elective deferrals has been increased from $13,000 to $14,000.
Additionally, if you have at least 15 years of service with a public school system, hospital, home health service agency,
health and welfare
service agency, church, or convention or association of churches (or associated organizations), the limit on elective deferrals
to your 403(b) account
is increased by the least of:
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$3,000,
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$15,000, reduced by the sum of:
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The increases to the general limit you were allowed in earlier years because of this rule, plus
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The aggregate amount of designated Roth contributions for prior tax years, or
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$5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer
on your
behalf for earlier years.
See chapter 4.
Limit on annual additions. For 2005, the limit on annual additions has been increased from $41,000 to $42,000.
Additionally, if you are a foreign missionary, and your adjusted gross income is $17,000 or less, contributions to your 403(b)
account will not be
treated as exceeding the limit on annual additions if the contributions are not in excess of $3,000. See chapter 3.
Catch-up contributions for persons age 50 or over. If you will be age 50 or over by the end of 2005, you may be permitted to make additional catch-up contributions of up to
$4,000 to your 403(b)
plan. See chapter 6.
Limit on elective deferrals. For 2006, the limit on elective deferrals has been increased from $14,000 to $15,000. See chapter 4.
Limit on annual additions. For 2006, the limit on annual additions has been increased from $42,000 to $44,000. See chapter 3.
Catch-up contributions for persons age 50 or over. If you will be age 50 or over by the end of 2006, you may be permitted to make additional catch-up contributions of up to
$5,000 to your 403(b)
plan for 2006. See chapter 6.
Roth contribution program. For tax years beginning after December 31, 2005, your 403(b) plan may allow you to contribute to a Roth contribution program.
Under this program,
you can designate all or a portion of your elective deferrals as Roth contributions. Elective deferrals designated as Roth
contributions must be
maintained in a separate Roth account. Contributions to a designated Roth account are not excluded from your gross income,
however, qualified
distributions from a Roth account are excluded from your gross income.
Elective deferrals. The maximum amount of contributions allowed under a Roth contribution
program is your limit on elective deferrals, less elective deferrals not designated as Roth contributions. See chapter 4.
Rollovers. A distribution from your designated Roth account can only be rolled over to another
designated Roth account of yours or a Roth (IRA) of yours.
Qualified distributions. A qualified distribution is a distribution that is made after
the nonexclusion period and:
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When you are age 59½ or over,
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Because you are disabled, or
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On or after the death of the plan participant.
A qualified distribution does not include a distribution of excess elective deferrals. Excess elective deferrals in a designated
Roth account are
treated in the same manner as excess deferrals in a non-Roth account. See chapter 8.
The nonexclusion period is the 5 tax-year period beginning with the earlier of:
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The first tax year in which you made a designated Roth contribution to any Roth account under the same plan.
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If a rollover contribution was made to a designated Roth account from a designated Roth account, previously established for
you under
another plan, then the first tax year you made a designated Roth contribution to your previously established account.
Proposed Income Tax Regulations pertaining to tax-sheltered annuities within the meaning of section 403(b) of the Internal
Revenue Code were issued
on November 16, 2004. Generally, when finalized, these regulations will be effective for taxable years beginning after December
31, 2006. The Proposed
Regulations, REG-155608-02, 2004-49 I.R.B. 924 are available at
www.irs.gov.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of
missing children
selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children
home by looking at the
photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
This publication can help you better understand the tax rules that apply to your 403(b) (tax-sheltered annuity) plan.
In this publication you will find information to help you:
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Determine the maximum amount that can be contributed to your 403(b) account in 2006.
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Determine the maximum amount that could have been contributed to your 403(b) account in 2005.
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Identify excess contributions.
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Understand the basic rules for claiming the retirement savings contributions credit.
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Understand the basic rules for distributions and rollovers from 403(b) accounts.
This publication does not provide specific information on the following topics.
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Distributions from 403(b) accounts. This is covered in Publication 575, Pension and Annuity Income.
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Rollovers. This is covered in Publication 590, Individual Retirement Arrangements (IRAs).
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Withdrawals, repayments, and loans from 403(b) annuity contracts for taxpayers who suffered economic losses as a result of
Hurricane
Katrina, Rita, or Wilma. This is covered in Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita,
and Wilma.
How to use this publication.
This publication is organized into chapters to help you find information easily.
Chapter 1 answers questions frequently asked by 403(b) plan participants.
Chapters 2 through 6 explain the rules and terms you need to know to figure the maximum amount that could have been
contributed to your 403(b)
account for 2005 and the maximum amount that can be contributed to your 403(b) account in 2006.
Chapter 7 provides general information on the prevention and correction of excess contributions to your 403(b) account.
Chapter 8 provides general information on distributions, and transfers and rollovers.
Chapter 9 provides blank worksheets that you will need to accurately and actively participate in your 403(b) plan.
Filled-in samples of most of
these worksheets can be found throughout this publication.
Chapter 10 explains the rules for claiming the retirement savings contributions credit.
Comments and suggestions.
We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
TE/GE and Specialty Forms and
Publications Branch
SE:W:CAR:MP:T:T:SP
1111 Constitution Ave. NW, IR-6406
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number,
including the area code, in
your correspondence.
You can email us at
*[email protected]. (The asterisk must be included in the
address.) Please put
Publications Comment on the subject line. Although we cannot respond individually to each email, we do appreciate your
feedback and will consider your comments as we revise our tax products.
Useful Items - You may want to see:
Publication
-
517
Social Security and Other Information for Members of the Clergy and Religious Workers
-
575
Pension and Annuity Income
-
590
Individual Retirement Arrangements (IRAs)
Form (and Instructions)
-
W-2
Wage and Tax Statement
-
1099-R
Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
-
5329
Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
-
5330
Return of Excise Taxes Related to Employee Benefit Plans
-
8915
Qualified Hurricane Retirement Plan Distributions and Repayments
