6 Tips about a Tax Credit for Pension Financial savings ?

If you make eligible contributions to an employer-sponsored retirement plan in order to an individual retirement arrangement, you may be entitled to a tax credit, depending on your age and income.
Here are six things the IRS wants you to definitely know about the Savers Credit:
1. Income limits The Savers Credit score, formally known as the Retirement Savings Contributions Credit score, applies to individuals with a filing status and 2011 income of:
? Single, married filing separately, or qualifying widow(er), with income up in order to $28, 250
? Head of Household with income up to $42, 375
? Married Filing Jointly, with incomes up in order to $56, 500
2. Eligibility requirements To be eligible for the credit you should be at least 18 years old, you cannot have already been a full-time student during the calendar year and cannot be claimed as a dependent on another person?s return.
3. Credit amount If a person make eligible contributions to some qualified IRA, 401(k) as well as certain other retirement programs, you may be in a position to take a credit of up to $1, 000 ($2, 000 if filing collectively). The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers using the least income.
4. Distributions When figuring this particular credit, you generally must take away distributions you received from your retirement plans from the contributions you made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period following the end of the credit year but before the due date ? such as extensions ? for filing the return for that credit year.
5. Other tax benefits The actual Retirement Savings Contributions Credit is in addition to other tax benefits you may receive for retirement contributions. For example, most workers at these income levels may deduct all or a part of their contributions to a conventional IRA. Contributions to a normal 401(k) plan aren?t subject to income tax until withdrawn from the plan.
6. Forms to use To claim the credit make use of Form 8880, Credit for Qualified Retirement Savings Contributions.
For more information, please visit http://www.excellencetaxservices.com/proadvisor.html or call Quickbooks Proadvisor in Philadelphia at 215-667-8839..

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