Tax Return-403b Not vested? W2 Box 13 has nothing checked

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Topic Author
gabhishekanand
Posts: 14
Joined: Tue Feb 10, 2015 2:04 pm

Tax Return-403b Not vested? W2 Box 13 has nothing checked

Post by gabhishekanand »

I got my W2 and I have a 403(b) plan through my employer who pays some amount to it irrespective of my contributions. The contributions started Oct 2014. I called my HR and she said though they are contributing money, I would not be eligible to receive a dime unless I complete 1 year which is October 2015. After a year I would be 50% vested and after 2 years I will be 100% vested.

When filing my tax return, one page asks if"Are you covered by a retirement plan at work?"- Should I say yes or no to this for 2014 years tax return?

If I am able to say NO to this question, then I can open a Traditional IRA and put 5500 in it and reduce my tax burden. If I say yes, its says due to MAGI I am ineligible if I open Traditional IRA

EDIT* - W2 Box 13 has three options - Statutory Employee/ Retirement Plan/ Third Party - None of them have a check mark on them

Please advice - Thank you for your time.
mlipps
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Joined: Thu Jun 21, 2012 9:35 am

Re: Tax Return-403b Not vested? W2 Box 13 has nothing checke

Post by mlipps »

Did you put money into the 403b or only your employer?
Topic Author
gabhishekanand
Posts: 14
Joined: Tue Feb 10, 2015 2:04 pm

Re: Tax Return-403b Not vested? W2 Box 13 has nothing checke

Post by gabhishekanand »

mlipps wrote:Did you put money into the 403b or only your employer?
Only my employer has put in it.. and they started from Oct 2014.
Topic Author
gabhishekanand
Posts: 14
Joined: Tue Feb 10, 2015 2:04 pm

Re: Tax Return-403b Not vested? W2 Box 13 has nothing checke

Post by gabhishekanand »

Thanks Kaneohe - I also found the IRS Link - http://www.irs.gov/Retirement-Plans/Are ... nt-Plan%3F

Just to ensure here were no administrative errors.> I checked with the HR and they said it is not checked because I am not vested in it confirming that there were no errors on their end and Box 13 on W2 - retirement plan was purposely not checked.

Hence I'm assuming I can say NO while filing tax return and when they ask - " Are you covered by a retirement plan at work?"
kaneohe
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Re: Tax Return-403b Not vested? W2 Box 13 has nothing checke

Post by kaneohe »

You might want to wait a few days to see what Alan S. says. The only worry is the contributions the employer is making. The IRS doc mentions contributions w/o saying whose.......".You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:
Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;" I know they later talk about Box 13 and the lack of a check mark and that you double checked w/ HR but maybe 2 HR folks made an error?
AWH_CPA
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Re: Tax Return-403b Not vested? W2 Box 13 has nothing checke

Post by AWH_CPA »

Being covered by an employer plan does not disallow you from making a contribution to a traditional IRA. It simply disallows you from taking a deduction for your contribution to the traditional IRA. You can still make the traditional IRA contribution, fill out form 8606 and simply convert it to a Roth IRA (assuming this is the only IRA you have).

That being said, the only way the IRS knows that you are covered by a plan is whether that box is checked on your W2. I am not going to say that it is accurate, but since it is not checked and you technically do not have any vested contributions, I would probably still take the deductible contribution. Just know that it prevents you from making a tax effective back door roth contribution if you have any money in traditional IRAs since the basis is spread out over a larger denominator when doing the taxable calculation.
Alan S.
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Re: Tax Return-403b Not vested? W2 Box 13 has nothing checke

Post by Alan S. »

Kaneohe is correct. HR is not handling Box 13 correctly. The following is copied from the IRS W-2 Instructions. It is a Box 13 decision chart:
Active participation
Form W-2 Box 13 Retirement Plan Checkbox Decision ChartType of PlanConditionsCheck Retirement Plan Box?
Defined benefit plan (for example, a traditional pension plan)
Employee qualifies for employer funding into the plan, due to age/years of service – even though the employee may not be vested or ever collect benefits
Yes
Defined contribution plan (for example, a 401(k) or 403(b) plan, a Roth 401(k) or 403(b) account, but not a 457 plan)
Employee is eligible to contribute but does not elect to contribute any money in this tax year
No
Defined contribution plan (for example, a 401(k) or 403(b) plan; a Roth 401(k) or 403(b) account; but not a 457 plan)
Employee is eligible to contribute and elects to contribute money in this tax year
Yes
Defined contribution plan (for example, a 401(k) or 403(b) plan; a Roth 401(k) or 403(b) account; but not a 457 plan)
Employee is eligible to contribute but does not elect to contribute any money in this tax year, but the employer does contribute funds
Yes
Defined contribution plan (for example, a 401(k) or 403(b) plan; a Roth 401(k) or 403(b) account; but not a 457 plan)
Employee contributed in past years but not during the current tax year under report
No (even if the account value grows due to gains in the investments)
Profit sharing plan
Plan includes a grace period after the close of the plan year when profit sharing can be added to the participant’s account
Yes
See Box 13—Checkboxes.
-28-
The final question referred to vesting. Vesting is immaterial to active participation determination. The tax court has also ruled that an employee who terminated and received nothing due to lack of vesting was still an active participant for the year contributions were made.

OK - HR is doing this wrong, but a payroll audit could result in a bunch of revised W-2 forms with Box 13 checked. I would call their attention to this now since the sooner they issue corrected forms, the better. There are IRS sanctions if an error in tax reporting is discovered and employer refuses to acknowledge the error.
Topic Author
gabhishekanand
Posts: 14
Joined: Tue Feb 10, 2015 2:04 pm

Re: Tax Return-403b Not vested? W2 Box 13 has nothing checke

Post by gabhishekanand »

Alan S. wrote:Kaneohe is correct. HR is not handling Box 13 correctly. The following is copied from the IRS W-2 Instructions. It is a Box 13 decision chart:
Active participation
Form W-2 Box 13 Retirement Plan Checkbox Decision ChartType of PlanConditionsCheck Retirement Plan Box?
Defined benefit plan (for example, a traditional pension plan)
Employee qualifies for employer funding into the plan, due to age/years of service – even though the employee may not be vested or ever collect benefits
Yes
Defined contribution plan (for example, a 401(k) or 403(b) plan, a Roth 401(k) or 403(b) account, but not a 457 plan)
Employee is eligible to contribute but does not elect to contribute any money in this tax year
No
Defined contribution plan (for example, a 401(k) or 403(b) plan; a Roth 401(k) or 403(b) account; but not a 457 plan)
Employee is eligible to contribute and elects to contribute money in this tax year
Yes
Defined contribution plan (for example, a 401(k) or 403(b) plan; a Roth 401(k) or 403(b) account; but not a 457 plan)
Employee is eligible to contribute but does not elect to contribute any money in this tax year, but the employer does contribute funds
Yes
Defined contribution plan (for example, a 401(k) or 403(b) plan; a Roth 401(k) or 403(b) account; but not a 457 plan)
Employee contributed in past years but not during the current tax year under report
No (even if the account value grows due to gains in the investments)
Profit sharing plan
Plan includes a grace period after the close of the plan year when profit sharing can be added to the participant’s account
Yes
See Box 13—Checkboxes.
-28-
The final question referred to vesting. Vesting is immaterial to active participation determination. The tax court has also ruled that an employee who terminated and received nothing due to lack of vesting was still an active participant for the year contributions were made.

OK - HR is doing this wrong, but a payroll audit could result in a bunch of revised W-2 forms with Box 13 checked. I would call their attention to this now since the sooner they issue corrected forms, the better. There are IRS sanctions if an error in tax reporting is discovered and employer refuses to acknowledge the error.
Thank You

I did get it to the HR attention and they said it was not supposed to be checked yes.. but the article you pasted clearly shows it needs to be yes. But my conversation with HR was via telephone. May be I should send them an official email.
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