Chaplains and evangelists are the only participants in the Ministers’ Retirement Plan who can make direct contributions by personal checks to their retirement accounts. All others must make their contributions by salary reduction or by employer contributions through an employer (or church) check. Since the plan is a before-tax, income retirement savings account, in other words a 403(b) account, all contributions must be made by the employer before the money is taxable to the participant. The Plan currently does not take “after-tax” contributions, such as could be made to a Roth-type individual retirement account. Again, the Board can accept personal checks only from chaplains and evangelists.
IRS Publication 571 goes into great detail discussing contributions to a 403(b) retirement account. The publication notes that generally employer contributions to a 403(b) account are not reported on the employer-provided W-2 form. Your employer, however, should report salary reduction amounts on your W-2 in Box 12 while checking “retirement plan” in Box 13. Again, contributions above and beyond your salary made by the employer (the church) to your account, as noted above, do not have to be reported at all on the W-2.
For evangelists (the IRS calls evangelists “self-employed ministers”), Publication 571 states that you must report your total contributions to your 403(b) plan as a deduction on your tax return by deducting them on line 28 of Form 1040.
On the other hand, Publication 571 notes that chaplains should take a deduction for their contributions by writing “403(b)” on the dotted line next to line 36 and deducting their contributions on that line.
Since lines 28 and 36 are both in the adjustment section of the 1040 tax return, noting the contributions on either line 28 for evangelists or line 36 for chaplains allows the minister to be able to deduct the contributions from his income just as though he were in an employment situation as a pastor or staff member of a church and such was deducted from his W-2 Box 1 income.
Please remember that these special rules only apply to evangelists or chaplains. For more information on this issue, please review IRS Publication 571.