Retirement Savings Contributions Credit f8880 - TurboTax is telling me I'm not qualified

[jamescataxes]

TurboTax is saying I am not eligible for the Retirement Savings Contributions Credit even though I can find no reason in the qualifications or f8880 that disqualify me. Even the IRS interactive assistant says I am qualified.

TurboTax says the qualifications are:

You're not a full-time student. - TRUE
You're 18 or older. - TRUE
No one else claims you as a dependent on their 2020 tax return. - TRUE
Your adjusted gross income (AGI) doesn't exceed $32,500 if single, married filing separately, or a qualified widow(er) - TRUE

I answer the TurboTax questions as follows:
Did you contribute to a qualified retirement plan in 2020? - YES (Roth IRA)

Were you a full-time student for at least five months during 2020? - NO

Let us know if you made any additional contributions to qualified retirement accounts - NO

Did you receive any distributions from a retirement plan after 2017? - NO (Not that I'm aware of)

I'm filing as single with about $7000 of business income and about $15,000 of SSDI (though that is not counted as income but maybe it has an effect?). I have have a tax owed due to self employment tax so the credit would be useful. I looked at form f8880 and do not see any reason I would be disqualified.

[MarilynG1]

It sounds like you would qualify for the Saver's Credit.

However, since we can't see your tax return in this forum, you may want to request an Offline Review where your return can be reviewed to determine why you are not receiving the credit. 

[jamescataxes]

Thank you for your answer. There is no option to select "Yes, I have a questions about my return" as the article you linked to suggests. I am using the Free Federal File version of TurboTax so maybe it doesn't include that option? If not is there any way to get an answer to my question? It seems like a problem with the TurboTax software. At the very least the software does not explain why I do not qualify for the credit. There is no worksheet for the form f8880, even with the complete download of my return and worksheets.

[mesquitebean]

---

@ jamescataxes wrote:

Thank you for your answer. There is no option to select "Yes, I have a questions about my return" as the article you linked to suggests. I am using the Free Federal File version of TurboTax so maybe it doesn't include that option? If not is there any way to get an answer to my question? It seems like a problem with the TurboTax software. At the very least the software does not explain why I do not qualify for the credit. There is no worksheet for the form f8880, even with the complete download of my return and worksheets.

---

You mentioned the "Free Federal File" version?    Is that the Free Edition?   TurboTax has 2 free products.

Which free product are you using?  Are you using the regular Free Edition (at the Online TurboTax website) or the TurboTax IRS Free File Program (at a special website?)

EDITED:  3/08/2021 11:30 PM Pacific

I had originally typed here that there would be a charge to upgrade from Free Edition to Live Basic, and there normally would be.

However, there is currently a limited-time special offer where Free Edition users can upgrade to Live Basic, which allows for help from a CPA/EA tax expert and a review of the return, which requires one file by March 27.  If not filed by March 27, the fee would be $80.

But hold off on that; it likely will not be necessary.  I think you can get a solution in this thread.

I'll ask someone familiar with retirement situations to look at the info you provided above and see if he can figure out why you might be having a problem getting that Retirement Savers credit.  But it may not be tonight.

@ dmertz  Are you able to assist the user here with the Retirement Savings Contribution Credit when you are next in the forum?  Thanks!

EDITED: 3/08/21 11:59 PM Pacific

@ jamescataxes 

I think I may have figured out why you are not getting the credit.  See my answer below this one where I explain.

[mesquitebean · Accepted solution]

@jamescataxes 

I also just thought of something that may explain your situation.   You wrote:

"I'm filing as single with about $7000 of business income and about $15,000 of SSDI (though that is not counted as income but maybe it has an effect?). I have have a tax owed due to self employment tax so the credit would be useful."

You only mentioned self-employment tax.  Do you have any income tax liability on your return?  Or is your only tax liability from the self-employment tax?    Self-employment taxes are considered "other taxes" and are not income taxes.

The Retirement Savers Contribution Credit is a non-refundable tax credit, which means it can reduce one's income tax liability down to $0, but not below.   A non-refundable credit, such as the Retirement Savers Credit, cannot reduce self-employment tax.

So if your income tax is already at $0, that may explain all this, but I'm a fellow user and not a tax expert.  Since I've already summoned  @dmertz let's see if he confirms this during the day.

[dmertz]

mesquitebean is correct.  With no income tax liability, you get none of this credit.  Your total tax liability consists only of Other taxes which cannot be reduced by this credit.

[jamescataxes]

Thanks, after reading your answer and studying the actual 1040 form I now see that this is "credit" is above the total tax line (1040 line 24) and not part of the payments and refundable credits like the EIC which are like actual cash and do count against self-employment tax.

I do think TurboTax could do a WAY better job of explaining this as you go. To have the software lead me through questions about a credit that it already knows I don't qualify for doesn't make much sense and then to tell me I don't qualify for it without a simple explanation like "You tax liability is already zero so you do not qualify for this credit because it would have no effect on your tax due" (especially  when the more info pop-up about the credit makes it look like I do qualify for it).