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Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Republican Member Chuck Grassley (R-IA) have called on the IRS to better publicize the saver’s credit, a nonrefundable tax credit that encourages low- to middle-income Americans to save money for retirement. The saver’s credit, embodied in Code Sec. 25B , was enacted under the Economic Growth and Tax Relief Reconciliation Act of 2001 and was made permanent by the Pension Protection Act of 2006 (P.L. 109-280). The credit, which varies according to income, enables eligible taxpayers to use retirement plan contributions (up to $2,000) to reduce their federal income tax liability on a dollar for dollar basis.
In a July 12, 2007 letter to Acting IRS Commissioner Kevin Brown, Baucus and Grassley asked the IRS to improve targeted advertising to ensure that eligible taxpayers are made aware that they can use the credit, permit taxpayers to claim the credit on the 1040-EZ, and refer to the saver’s credit consistently in all IRS forms and publications.
“The saver’s credit has helped millions of Americans save for their retirement, but it could be helping even more,” said Baucus. “Many eligible taxpayers are not claiming the saver’s credit simply because they don’t know about it. It’s hard for families to put away dollars for retirement, and the IRS should do all it can to help Americans maximize their savings with the saver’s credit. Making it possible to claim this credit on the 1040-EZ form used by many Americans eligible for the saver’s credit would be a vital step.” Echoing this call, Grassley said, “I hope the IRS will work with us to publicize the saver’s credit as much as possible so every eligible taxpayer is aware of the benefit. Congress made this a priority, and we want to see people use it and watch their savings grow.”
For more information on this and related topics, consult the CCH Pension Plan Guide.
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