Tax Savers Credit 2013

[Rpharmer]

I had about $1000 last year in earned income (wages from a training session at the IRS that didn't pan out.) I put the money in my traditional IRA account, and I also wanted to take the Tax Saver's Credit. Turbo Tax says I can't, although I meet the income thresholds. (It would be a 50%, or $500 credit -- but they say its zero.)

Is it because I received $1100 from an old pension fund in 2013? Is that properly subtracted from my IRA contribution when calculating the credit? I understand the math and the form (and the instructions' terminology -- sort of). But I'm curious about the "why." Doesn't this discourage low-income retirees who take part-time jobs from saving more for retirement -- or does Congress/the IRS think that if you have any pension income, you don't need to save any more (ha)?

 

[ziggy29]

Maybe this part?

Get Credit for Your Retirement Savings Contributions

Distributions When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date - including extensions - for filing the return for the credit year.

In other words, any contributions you make are offset by distributions you take from these plans. In this case it would not only include 2013 distributions but also distributions taken in 2011 and 2012 -- as well as distributions taken between 1/1/2014 and 4/15/2014 if I'm reading this correctly.

 

[Refresher]

Maybe this part?

Get Credit for Your Retirement Savings Contributions

In other words, any contributions you make are offset by distributions you take from these plans. In this case it would not only include 2013 distributions but also distributions taken in 2011 and 2012 -- as well as distributions taken between 1/1/2014 and 4/15/2014 if I'm reading this correctly.

So if someone did a Roth conversion in 2011 2012 or 2013 and wanted to contribute $1000 earned income to a 2013 Traditional IRA they would not get the credit because the conversions are distributions.

Suppose they contribute the $1000 to the Roth instead of the Traditional?
No distribution as taken from the Roth but maybe the Traditional distribution is counted.

 

[kaneohe]

So if someone did a Roth conversion in 2011 2012 or 2013 and wanted to contribute $1000 earned income to a 2013 Traditional IRA they would not get the credit because the conversions are distributions.

Suppose they contribute the $1000 to the Roth instead of the Traditional?
No distribution as taken from the Roth but maybe the Traditional distribution is counted.

http://www.irs.gov/pub/irs-pdf/p4012.pdf
see bottom of p. G7

Roth conversions or IRA rollovers are not used against you .......seems fair as you aren't withdrawing retirement funds on an overall basis.