ProWeb: Form 8880 - Retirement Savings Credit

Form 8880 is used to figure the amount of the credit a taxpayer can take for making contributions to a retirement plan. Also known as the saver's credit, a taxpayer and/or spouse may be eligible for the credit for the following kinds of contributions:

• contributions (other than rollover contributions) to a traditional or Roth IRA,
• elective deferrals to a 401(k), 403(b), governmental 457, SEP, or SIMPLE plan,
• voluntary employee contributions to a qualified retirement plan as defined in section 4974(c) (including the federal Thrift Savings Plan), or
• contributions to a 501(c)(18)(D) plan.

This is a nonrefundable credit, so it reduces the tax liability but will not be refunded if the tax liability is already at zero.

A taxpayer is eligible for the credit if they are:

• Age 18 or older,
• Not claimed as a dependent on another person’s return, and
• Not a student.

The maximum amount of contributions that may qualify for the credit is $4,000 for MFJ filers and $2,000 for all others. The amount of the credit is equal to 50%, 20%, or 10% of the contributions depending on the adjusted gross income, but no credit is available if the taxpayer's AGI is greater than the annual limitation:

For the taxpayer (and spouse on MFJ return) the following kinds of contribution are eligible for the credit:

• Traditional IRA contributions for this year.
• Roth IRA contributions for this year.
• Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions under section 402A), or to a governmental 457, SEP, or SIMPLE plan.
• Voluntary employee contributions to a qualified retirement plan as defined in section 4974(c) (including the federal Thrift Savings Plan).
• Contributions to a 501(c)(18)(D) plan.

Even if a taxpayer qualifies for the credit, their eligible contributions will be reduced by certain distributions received during the "testing period." The testing period includes:

• The tax year
• The two preceding tax years, and
• The period between the end of the tax year and the due date of the return, including extensions.

Mandatory contributions as a condition of employment, as well as contributions under section 414(h)(2) treated as employer contributions, are not eligible for the saver's credit.

Completing the Form in TaxSlayer ProWeb

Retirement contributions shown on Form(s) W-2 in Box 12 with code D automatically flow to Form 8880. (Thus, Form 8880 cannot be deleted if a W-2 shows such contributions.) Otherwise, there are several additional entries on the form that may need to be made. To complete Form 8880, from the Federal Section of the tax return (Form 1040) select:

• Deductions
• Credits
• Credit for Qualified Retirement Savings Contributions - For the taxpayer, and spouse if applicable, enter the following information as needed:
• Enter Any Qualifying Retirement Distributions [ during the testing period ] - Enter the sum of any of the following distributions received in the two years prior to the current year plus distributions received in the following year up to the return's filing deadline, including extensions: traditional or Roth IRAs, or ABLE accounts; 401(k), 403(b), governmental 457(b), 501(c)(18)(D), SEP, SIMPLE, or the federal TSP; qualified retirement plans, as defined in section 4974(c).
• Enter as a negative number, any current year distributions reported as income that should not be included on Line 4 of Form 8880 - Enter as a negative number current year distributions that are excluded from consideration. These include distributions from a military retirement plan (not federal TSP), distributions of contributions to an IRA that were returned on or before the due date of that year's return, distributions rolled over and converted to a Roth IRA, et.al. (See the Form 8880 instructions for a complete list.)
• Enter Any Current Year Traditional or ROTH IRA Contributions - Enter here contributions not already reported in the IRA Deductions menu.
• Enter any Elective Deferrals to a 401(k) or other Qualified Plan not reported on a W-2 - Enter any contributions not reported in Form W-2 Box 12. This includes elective deferrals to a 401(k), 403(b), governmental 457(b), SEP, SIMPLE, or to the federal TSP; voluntary employee contributions to a qualified retirement plan, as defined in section 4974(c); and contributions to a 501(c)(18)(D) plan.

Note: This is a guide to entering Form 8880 in TaxSlayer ProWeb. This is not intended as tax advice.

Additional Information:

IRS: Instructions for Form 8880, Credit for Qualified Retirement Savings Contributions

Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)