In 2002 the federal government created the Retirement Savings Contribution Credit, which encourages low to moderate income tax filers to make contributions to a retirement savings account. Originally a temporary tax credit, it was made a permanent tax credit under the Pension Protection Act of 2006.
WHO ADMINISTERS THE PROGRAM
The Retirement Savings Contribution Credit is administered by the Internal Revenue Service (IRS).
Unlike a government benefit, which is funded through specific allocations and expenditures, federal tax credits are dispersed from tax revenues collected by the IRS.
Summary of the Retirement Savings Contribution Credit
The Retirement Savings Contribution Credit is a credit available to workers who make eligible contributions to a qualified IRA, 401 (K), or certain other retirement plans. To claim the credit, taxpayers must complete form 8880, Credit for Qualified Retirement Savings Contributions, and attach the form to his/her Form 1040, or Form 1040A. The federal tax credit is not refundable; that is, claimants cannot receive a refund for any part of the credit that is more than their tax liability.