Retirement Savings Contribution Credit

[RLucas]

My friend was employed as a teacher at 2 different charter schools in 2019, and had a combined AGI of $29608, after her elective deferrals of $5040 to the employer retirement plans. $1680 was deferred to the first employer which was listed on her W-2 box 12 as Code E – Elective deferrals under section 403(b) salary reduction agreement – and Turbo Tax assigned $168 to the Retirement Savings Contribution Credit. $3360 was deferred in retirement contribution to her 2nd employer and it was coded on the W-2 box 12 as Code G – Elective deferrals and employer contributions to a section 457(b) deferred compensation plan. Turbo Tax did not assign any Retirement savings Credit although she would have been eligible for up to $32 additional amt. to meet the $200 maximum credit allowed for Single Fling status (10% up to $2000 contribution.) W-2 for 1st employer has box 13 for retirement plan checked, but W-2 of 2nd employer did not have a check mark in box 13.

Does the 457(b) plan from the 2nd employer somehow not qualify for this credit?

[ColeenD3]

Yes. It does.
 

The saver's tax credit is a non-refundable tax credit available to eligible taxpayers who make salary-deferral contributions to employer-sponsored 401(k), 403(b), SIMPLE, SEP, or governmental 457 plans. It is likewise available to those who contribute to traditional and/or Roth IRAs.

There is however, on Line 4 for Form 8880, a possible disqualifier. Amounts taken in prior years can bring the credit to zero.

Line 4: Certain distributions received after 2016 and before the due date (including extensions) of your 2019 tax return (see instructions). If married filing jointly, include both spouses’ amounts in both columns. 

Savers Credit

[RLucas]

I am almost certain that she has received no distributions.

I did experiment with the W-2 box 12 of the 2nd employer with 457(b) plan and changed the code from "G - 457(b) plan", to Code "E - 403(b) plan", and when I changed it to "E", Turbo tax added $32 to the Saver's Credit amount to Max it out, and when I changed code back to "G", it removed the $32. This is what made me wonder if there was something about Turbotax considering the 457b plan is not eligible. This employer is a nonprofit charter school, so it would be considered a governmental 457(b)?

[macuser_22]

I cannot reproduce that.  I tried it for both codes and get the same credit for both.

Print and look at the 8880 form to see what is going on.  The elective deferral should be on line 2 in both cases.

[RLucas]

Form 8880 only shows $1680 contribution from 1st employer. It does not list the $3360 contribution through the 2nd employer with 457(b) plan.

I reviewed the W-2 entries again. Turbo tax asks question about 457(b) employer if they are a state or local government. If I answer "yes", turbo tax includes contribution from this employer and adds the $32 to the credit. If I answer "no", Turbo tax removes it. The employer is a private nonprofit charter school and receives funding from state and federal government. The description for employer says it is a non profit, so it is tax exempt, and should therefore qualify to have a 457(b) plan??

[macuser_22 · Accepted solution]

I suspect that private 457 plans are not eligible, but I haven't found a reference to point you to.

@dmertz Do you know?

[dmertz · Accepted solution]

Correct.  Only elective deferrals or Roth contributions to a governmental 457(b) plan can be considered for this credit.  Elective deferrals or Roth contributions to a nongovernmental 457(b) plan such as one established by a charity do not qualify for this credit.

"Governmental" means that the employer is a governmental entity defined in § 457(e)(1)(A):

(A)  a State, political subdivision of a State, and any agency or instrumentality of a State or political subdivision of a State

[RLucas]

Thanks a lot for clarifying this!