Starting a 457b first time, Maryland government employee

Forum|Forum|2 years ago
February 2, 2024
1 reply
0 views

I'm helping someone with their return that's a new Maryland government employee in 2023.

He needs to lower his tax commitment (taxable income) by about $1200, or he's going to owe $277 in Federal taxes.

Does he have until April 15 2024 (ish) to make a contribution to a new 457b with his human resources department?

I'm thinking that's not 401k for him, it's 457b, right?

What deduction section are 457's in on TT?

After it's set up with them, is that (the 457) a 1099-R next year from Maryland, and/or a box on his W2?

Not sure why I'm so confused!

Best answer by dmertz

Employee deferrals to a 457(b) come from the employee's pay. Deferrals made in 2024 reduce 2024 taxable income, not 2023 taxable income. Employee deferrals reduce the amount of wages reported on the employee's W-2, they cannot be taken as a deduction on the employee's tax return.

The only possible ways in 2024 to make contributions that would reduce 2023 taxable income would be to make a deductible traditional IRA contribution for 2023 (if you are eligible to make a deductible contribution based on your modified AGI for the purpose, filing status and whether box 13 Retirement plan is marked on your W-2) or to make an HSA contribution for 2023 (if eligible).

dmertzAnswer

Employee

leelesesAuthor

Thank you! Right now he's insisting on paying the $277 Federal tax. Young people! 🙂

What does whether box 13 Retirement plan is marked have to do with it? I always wondered what that "X" does for you?

dmertz

Employee

Box 13 Retirement plan being marked indicates to the IRS that the modified AGI for the purpose is a factor in determining whether or not a traditional IRA contribution made by the individual or the individual's spouse is deductible. This box was added to Form W-2 in 1987 (at the time just labeled "Pension plan") when the Tax Reform Act of 1986 placed a limitation on the IRA deduction for active participants in employer-provided retirement plans.