Wondering why Turbo Tax asks if I'm a state or local government employee when I add in a 457b contribution. These plans aren't just for government agencies, they're also for some non-profits. Is there a difference in tax treatment for government vs. non-profit, or is this potentially a bug in Turbo Tax?
I don't know of any difference in the plans for government versus non-profit on the federal level. They are the same in that they apply to organizations that don't have a profit motive. I suspect there may not be a mention of non-profits in TurboTax since special treatment of income associated with government retirement plans for state taxation is common, while the same does not apply to non-profits.
Thanks for that @ThomasM125, that's very helpful. I was just worried it might somehow end up treated as taxable based on answering "no" to being a government employee, when it's a tax-deferred contribution.
457(b) plans can be established either by a governmental entity or a tax-exempt organization. 457(b) plans of a governmental entity are qualified retirement plans. Those established by a tax-exempt organization are nonqualified plans. Only qualified retirement plans can be moved by rollover to another qualified retirement account.