Questions about Savers Credit

[melissaforpeace315]

Hello!  I heard that I might qualify for the Savers Credit considering that I've contributed to both a Roth IRA and a 401k and only worked for four months in 2020 (meaning that I made less than $30,000 in 2020).  I found this information on the IRS site: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-save...

 Unfortunately, I filed my 2020 taxes already through TurboTax. I don't recall them asking if I qualify for the Savers credit?   Does that mean that I lost it?   What do I do?  any help would be much appreciated!  Thank you!

[AlanT222]

No, if you qualify for the Savers Credit, you did not lose it.  You can file an amended income tax return to claim the credit.  

The Retirement Savings Contributions Credit (Saver’s Credit) helps low and middle-income taxpayers save for retirement. Sometimes this is called the Credit for Qualified Retirement Savings Contribution or Retirement Credit. It’s a non-refundable tax credit which means it can’t reduce the amount of tax owed to less than zero.

The Saver’s Credit can be taken for your contributions to an ABLE (Achieving a Better Life Experience) account if you’re the designated beneficiary.

Based on your income and filing status, you may claim a credit on your return for a percentage of the contributions you made to a qualified retirement plan.

You qualify for the credit if you’re:

• 18 or older
• Not a full-time student
• Not claimed as a dependent on someone else’s return

In 2020 your adjusted gross income (AGI) also can’t be more than:

• $65,000 if married filing jointly
• $48,750 if head of household (with qualifying person)
• $32,500 if single, married filing separately, or qualifying widow(er) with dependent child

The maximum credit is $1,000 ($2,000 for married taxpayers who are filing jointly), but is often less due to other deductions and credits and is limited by income. For more details on how to calculate your credit, see the IRS Saver's Credit page.

We’ll calculate this credit for you if you qualify and generate Form 8880.

[melissaforpeace315]

@AlanT222 So being that I did my 2020 taxes already for Turbo Tax and received a refund already, does that mean that TurboTax never asked me about the Savers credit and never saw that I qualified or not?    I filed my taxes a few weeks ago and just received my refund, and don't really recall TurboTax asking me anything about Savers Credit nor did TurboTax inform me anything about whether or not I qualified for such a credit

Thanks again for your help!

[HelenC12 · Accepted solution]

No, not necessarily. TurboTax automatically calculates the credit. Check your filed Schedule 3 (Form 1040) line 4 to see if you received it.

If you don't see an amount, remember, the credit in a nonrefundable credit. A nonrefundable credit is subtracted from your income tax liability, up to the total amount you owe. But unlike a refundable tax credit, a nonrefundable credit cannot reduce your tax balance beyond zero. 

• Review Form 8880 line 11 for the limitation based on tax liability.

You aren't eligible for the credit if:

• The amount on Form 1040, 1040-SR, or 1040-NR, line 11, is more than $32,500 ($48,750 if head of household; $65,000 if married filing jointly).
• The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 2003; (b) or is claimed as a dependent on someone else’s 2020 tax return; or (c) was a student.

For additional information, see What Is the Difference Between a Refundable and a Nonrefundable Credit?

[dmertz]

It's likely that TurboTax would have prompted you to review the Retirement Savings Contributions Credit section if you qualified for this credit.  Note that this is a nonrefundable credit, so if your income tax liability is already zero without the credit, you get no credit.  This credit cannot be used to reduce other taxes such as self-employment taxes or penalties for early distributions from retirement plans.

You can go through the process of amending to see if reviewing the Retirement Savings Contributions Credit section result in a credit and a refund and, if it does, file For 1040-X and Form 8880 to claim refund.

[melissaforpeace315]

@HelenC12 Thank you so much!

[melissaforpeace315]

@dmertz Thank you so much!

[10Kosmo]

@HelenC12 

I have not eFiled my return because Turbo Tax did not calculate for me. I am qualified to receive Saver's Credit.

Please HELP!!!

Also, I am holding off awaiting for the update related to the unemployment tax exemption.

[ReneeM7122]

Here is a TurboTax link about the Saver's Credit.  To claim the credit, use Form 8880, "Credit for Qualified Retirement Savings Contributions."  You can find the form on TurboTax by searching for it with the search tool, and then following the Jump to link.

@10Kosmo

[fanfare]

Since TurboTax calculates that credit, amending would do nothing.