Saving for Retirement: It’s About More Than Just the Golden Years

March 31, 2011 by  Filed under: Taxes 

Maximizing Taxpayer Retirement Credits & Deductions

For taxpayers in the current economy, being able to save for retirement and enjoy those “golden years” is becoming a more difficult proposition than ever. With that said, it is important to recognize that the benefits are not just long-term. With several credits and deductions now available for various retirement savings, many of the monetary benefits are immediate. For CPAs and IRS enrolled agents looking to maximize short and long-term goals of taxpayers, these features can help.

The Savers Credit (a.k.a. Retirement Savings Contributions Credit) and retirement deductions have been updated in recent years, and assessing eligibility and filing requirements for both, particularly as a strategy for maximizing potential benefits, is often overlooked

Key Savers Credit Tips

Below are some of the more important Savers Credit tips that may apply to taxpayers:

Program Eligibility – there are a few key eligibility requirements to quickly check before proceeding with determining how much credit a taxpayer can receive:
Taxpayer must have been born prior to January 2nd 1992
Also they cannot be a full-time student
If claimed as a dependent then taxpayer is not eligible

Income limits can only be up to:
Single – $27,750
Head of household – $41,625
Joint Filing – $55,5000
Credit Limitations – taxpayer credit limitations for contributions to retirement plans (i.e. IRA, 401(k), etc.) allow for credits up to: $1,000 (up to $2,000 for joint filing)

Figuring Distributions – any received distributions from retirement plan should generally be deducted from taxpayer total contributions.

Key Retirement Deductions Tips

Below are some quick tips for tax preparers to consider that cover standard deductions for retirement savings for clients as well as deduction commonly overlooked:

Program Eligibility – key eligibility requirements to consider:
Taxpayer must be under 70 ½ years old (this does not apply to Roth IRA’s)

Income also impacts eligibility:
Single -$56,000
Joint Filing – $89,000
Deduction Limitations – the maximum deductions a taxpayer can apply vary depending on age. If a taxpayer is under 50 years of age, the amount is $5000. If 50 or older, $6000 can be deducted.
Figuring Deductions – the general term used for calculating taxpayer eligibility is the modified adjusted gross income (MAGI). Although this is a bit more complex than figuring distributions, there are some general rules that should be followed. Using the adjusted gross income, for example, and any raises in the current year should also be included. This way the taxpayer can add back any deductions (including the retirement deductions) and expenses. This should be the final amount used to determine deduction eligibility and totals.

Determining retirement credits and deductions can often add up to thousands of dollars in immediate savings for a taxpayer. In addition to the points just outlined, there are other nuances and considerations involved in this process. As they often say, the “devil is in the details.” Fortunately for tax preparers like enrolled agents, they can find many tax CPE courses, prometric ea exam reviews and standard tax agent course materials that cover the mechanics of best assessing all facets of retirement savings. Maximizing these savings can make even the current year a “golden” one for the average taxpayer.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Fast Forward Academy is a leading publisher of education for IRS enrolled agents and tax professionals. Access to free questions for the enrolled agents is available on their website at

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