Benefits December 21, 2007

Retirement Savers Credit Claimed on 5 Million Returns

December 21, 2007 (PLANSPONSOR.com) - Internal Revenue Service (IRS) data indicates that the Saver's Credit was claimed on about 5.3 million tax returns - 4% of all tax returns - filed each year from 2002 through 2005, according to a Congressional Research Service (CRS) fact sheet.
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The average credit was equal to about 16% of the average amount contributed to retirement plans by taxpayers who claimed the retirement savings credit, the fact sheet said. The average annual credit was $190, while the average retirement plan contribution on which the credit was claimed was $1,200.

The IRS put out a reminder in November to low- and moderate-income workers that they may be eligible for the saver’s credit for their contributions to an IRA or defined contribution savings plan and of the requirements for eligibility for the credit (See IRS Reminds Taxpayers about Retirement Savings Credit ).

The Economic Growth and Tax Relief Reconciliation Act of 2001 authorized a non-refundable tax credit of up to $1,000 for eligible individuals who contribute to an IRA or an employer-sponsored retirement plan effective in 2002. The amount of credit depends on the taxpayers filing status and adjusted gross income.

The credit was set to expire after the 2006 tax year, but the Pension Protection Act of 2006 removed that sunset.

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