IRS PROMOTES SAVER'S CREDIT
Washington, D.C. - The Internal Revenue Service is encouraging more taxpayers to take advantage of the "saver's credit," which enables low- and moderate-income workers to begin to save for their retirement while earning a special tax credit in 2011 and the years ahead.
The credit helps offset part of the first $2,000 that workers voluntarily contribute to IRAs, 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver's credit is available in addition to any other tax savings that apply.
Eligible workers have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still get credit for 2011. However, elective deferrals must have been made by the end of 2011 to 401(k) plans or similar workplace programs. Employees who were unable to set aside money may want to schedule their 2012 contributions soon.
The saver's credit can be claimed by:
Married couples filing jointly with incomes up to $56,500 in 2011 or $57,500 in 2012;
Heads of households with incomes up to $42,375 in 2011 or $43,125 in 2012; and,
Married individuals filing separately and singles with incomes up to $28,250 in 2011 or $28,750 in 2012.
Though the maximum saver's credit is $1,000 ($2,000 for married couples), the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.
A taxpayer's credit amount is based on the taxpayer's filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is filed to claim the saver's credit. The form's instructions provide the details on figuring the credit correctly.
In tax year 2009, the most recent year for which complete figures are available, saver's credits totaling just over $1 billion were claimed on just over 6.25 million individual income tax returns. The saver's credits claimed on these returns averaged $202 for joint filers, $159 for heads of household, and $121 for single filers.
