Employers Should Inform Staff of Tax Break
The IRS announcement includes the following language which it is recommended that employers use to inform their employees of this tax credit:
Beginning in 2002, if you make a contribution to [name of retirement plan offered by employer] or to an IRA, you may be eligible for a tax credit, called the "saver's credit." This credit could reduce the federal income tax you pay dollar-for-dollar. The amount of the credit you can get is based on the contributions you make and your credit rate. The credit rate can be as low as 10%, or as high as 50% depending on your adjusted gross income - the lower your income, the higher the credit rate. The credit rate also depends on your filing status.
The maximum contribution taken into account for an individual is $2,000. If you are married filing jointly, the maximum contribution taken into account is $2,000 each for you and your spouse.
The credit is available to you if you:
- are 18 or older,
- are not a full-time student,
- are not claimed as a dependent on someone else's tax return, and
- have adjusted gross income (shown on your tax return for the year of the credit) that does not exceed:
$50,000 if you are married filing jointly
$37,500 if you are a head of household with a qualifying person, or
$25,000 if you are single or married filing separately
The announcement also includes answers to frequently asked questions and descriptive scenarios which illustrate examples of how the credit works.