On December 13 the IRS issued an Information Release reminding employers and individuals of the availability of the “Saver’s Credit” for 2012. Those individuals who have remaining salary and bonuses for 2012 who have not made elective deferrals to their 401(k) or 403(b) plans may have an opportunity to do so with help from the federal government.
The eligibility is dependent upon the taxpayer’s adjusted gross income. For married couples filing jointly, the cap for 2012 is $57,000; married filing separately and singles can earn up to $28,750 in 2012 and be eligible for the credit. These amounts increase to $29,500 for singles and $59,000 for joint filers for 2013. According to the IRS Information Release the credit is not available to taxpayers under age 18, anyone who can be claimed as a dependent or a student.
It is a refundable credit so it can increase the refund or be used to offset other tax liability. The amount of the credit depends on the employee’s income and ranges from 10% to 50% of the first $2,000 deferred to a plan or IRA. The maximum credit is $1,000 per person/$2,000 for married couples.
The credit is also available for contributions to IRAs so those individuals who do not have access to an employer savings plan can set up an IRA on or before April 15, 2013. Individuals claim the Savers Tax Credit by filing IRS Form 8880 with their tax return for the year. .
Employers should consider reminding lower income workers of this benefit, particularly those who have made elective deferrals during the year.