Q. Some years I get a credit or deduction for my contribution, and I just accept whatever the online system gives me. Do regulations change from year to year? What is allowed?
A. The Retirement Savings Contributions Credit (“Saver’s credit”) is very limited and is generally for low income people. It would not be unusual for you to qualify some years and not qualify in other years.
See the table on Form 8880: https://www.irs.gov/pub/irs-pdf/f8880.pdf
To qualify, you, or your spouse, must not have taken money out of a retirement account (including drawing a pension) in the last three years. See line 2 on form 8880. Full time students are not eligible.
Q. I always report my annual contributions, which I understand the IRS needs so they know how to tax when I begin to take distributions. Right?
A. Even though you enter your Roth contribution, in TurboTax (TT), it is not reported to the IRS (unless you claim the saver's credit). Your IRA custodian reports your contribution, to the IRS. on for 5498 (which you get a copy of). You need to keep track of your contributions. TT will prepare a worksheet (that is not sent to the IRS) that helps you keep track of your contributions. If you only take qualified distributions, in the future, then you will not need that info.
