THE FEDERAL GOVERNMENT WANTS YOU TO SAVE FOR YOUR RETIREMENT SO BADLY that it will give you as much as $2,000 in a nonrefundable credit (reduces your tax liability but doesn’t give you a refund) provided you invest money in a tax-deferred pension (401K, IRA, Roth, etc.) before April 15.
The IRS calls this incentive the “Saver’s Credit” and has made it available to millions of families with an annual income of $57,500 or less in 2012.
If you decide to file your own return, you should know that you can’t claim the saver’s credit on a 1040EZ form. You’ll have to fill out one of the longer forms. But for $2,000, who cares. A tax credit of as much as $2,000 should make it easy to spend a little more time with a little more paper.
If you hire a professional tax preparer, be sure to let him or her know that you’re eligible for the “Saver’s Credit”.
Here’s what the IRS wants you to know (straight from the IRS website): “Saving for your retirement can make you eligible for a tax credit worth up to $2,000. If you contribute to an employer-sponsored retirement plan, such as a 401(k) or to an IRA, you may be eligible for the Saver’s Credit.”
Here are 7 points the IRS would like you to know about the Saver’s Credit:
1. The Saver’s Credit, formally known as the Retirement Savings Contribution Credit, can be worth up to $2,000 for married couples filing a joint return or as much as $1,000 for single taxpayers.
2. Your filing status and the amount of your income affect whether you are eligible for the credit. You may be eligible for the credit on your 2012 tax return if your filing status and income are:
- Single, married filing separately or qualifying widow or widower, with income up to $28,750
- Head of Household with income up to $43,125
- Married Filing Jointly, with income up to $57,500
3. You must be at least 18 years of age to be eligible. You also cannot have been a full-time student in 2012 nor claimed as a dependent on someone else’s tax return.
4. You must contribute to a qualified retirement plan by the due date of your tax return in order to claim the credit. The due date for most people is April 15.
5. The Saver’s Credit reduces the tax you owe.
6. Use IRS Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit.
7. Depending on your income, you may be eligible for other tax benefits if you contribute to a retirement plan. For example, you may be able to deduct all or part of your contributions to a traditional IRA.
Note: Because each person and each business has unique needs and because tax laws are subject to change without notice, we invite you to call 610-594-2601 to make an appointment to consult with one of our tax professionals before making any final decisions about the 2012 “Saver’s Credit”.
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