Trying to use savers credit and 401k funds to fund IRA for my wife and I. Can this be done?

[francist4242]

TurboTax is saying I would get about $1500 more from the savers tax credit if I contribute $5,500 to an IRA for my wife and I to total $11,000.  Would it be beneficial to take an early distribution from my 401k to fund two IRAs with this money or is this even allowed?  Maybe just rollover my portion to an IRA and take early distribution to fund her IRA?  

[Lisa995]

Youre asking from TurboTax Business, are you working on a corporation return or ?

[francist4242]

No, this is a personal return.  Sorry for the confusion.

[BobinCT · Accepted solution]

It doesn't work.  The saver's credit is for the NET contribution to an IRA after offsetting recent withdrawals from other tax qualified plans.  "they" thought of that!

[francist4242]

Would it have been possible if I made a loan from the 401k plan before I was separated from the company and continued to pay on that loan?