Savers Credit

[Jesse]

My brain is tired! Had client come in today that has come to me since 2000. He decided it was a year for "something new" so he went elsewhere this year and came back upset because I did not take the Form 8880 Savers credit last year.

I checked out last years return and the worksheet carryover on my tax program indeed denied the credit because in 2002 and 2003 he had an IRA distribution of $6000 each year. There is a "look back" period for w/drawal of retirement funds and as well you can not put money in for the savers credit and turn around and take it out before the current years due date - correct?

I'm thinking that the current preparer took the credit incorrectly because he did not have a worksheet to figure the distributions from 2002 and 2003? Or am I miscalculating?

If I'm correct in my original return will the IRS w/ matching catch this if my (now) ex-client files an amended return?

[Brian EA]

My brain is tired! Had client come in today that has come to me since 2000. He decided it was a year for "something new" so he went elsewhere this year and came back upset because I did not take the Form 8880 Savers credit last year.

I checked out last years return and the worksheet carryover on my tax program indeed denied the credit because in 2002 and 2003 he had an IRA distribution of $6000 each year. There is a "look back" period for w/drawal of retirement funds and as well you can not put money in for the savers credit and turn around and take it out before the current years due date - correct?

I'm thinking that the current preparer took the credit incorrectly because he did not have a worksheet to figure the distributions from 2002 and 2003? Or am I miscalculating?

If I'm correct in my original return will the IRS w/ matching catch this if my (now) ex-client files an amended return?

You are not miscalculating. The IRS will certainly pick it up. He will need to file an amended return.
He should not have deserted you

[Matt Sova]

Let him sweat

He came in your office complaining about something you did correctly just because his new preparer does not know what they are doing. Just tell him he did not qualify for it. Then let the new preparer amend the prior to take it and laugh at him when he comes crawling back to you to fix the penalties!!!!

I had a similar situation this year with a client that decided to do their return on-line (idiots). Any way the wife called me to complain that I did not take the Mich property tax credit last year and they made more money this year and got it. Well, the morons don't know, nor does the crappy on-line software know, that you have to add back Dependent Care Benefits. With that added back it put them over the income limit, therefore, they do not qualify. I basically told her to read the instructions and it will become clear to her or she could bring the stuff in and get it done right.

Idiots tick me off.

[Jesse]

Thanks for the reassurance

I wish no harm on my ex-client, but I hope the IRS does catch the error so he can eat his words. I am only human and I can't say I never make mistakes but I'm not the "idiot" he's making me out to be either!!

I think the IRS and their free file or the turbo tax add all stink - any software will guarantee their calculations but it depends on where you enter what numbers that make the calculations correct.

Oh well - like I said my brain is tired!!!!

[Gene V]

saver credit

Also, you must be careful on IRA’s rollovers, if you don’t check the box that say distribution not from IRA or elective deferral plan, my program (Lacerte) will add this amount to form 8880 as distribution and disallow the credit.

[Unregistered]

Good reason to go to the same person

That is a good reason to tell your client he needs to go to the same tax preparer every year. The new preparer probably did not have copies of the back returns to see that he had withdrawn something and he didn't know what they were talking about when he/she asked him.

I would send copies of his old returns with him showing the IRS withdrawl and have him take it to the new preparer and have her/him fix the current return.

[Ken]

credit

While we're on the subject, I had a similar incident the other day. I did a return for a client that had been doing his own taxes for several years. I noticed he also gave himself the savers credit for each of those years. He is retired from the military, so does that retirement disqualify him for that credit? I have read the instructions for the credit and all I can find is that it says "certain" distributions have to be figured in the calculation of the credit. Would government retirement qualify as "certain" distributions?

PS my software seems to think it does disqualify him, but I am curious.

[ecb34691]

The disqualifiers are basicly those in which you got a tax benefit in prior years - IRA's, 401k's, 457's, SEP's, etc. A military/gov't pension doesn't disqualify him.

[Brian EA]

That is a good reason to tell your client he needs to go to the same tax preparer every year. The new preparer probably did not have copies of the back returns to see that he had withdrawn something and he didn't know what they were talking about when he/she asked him.

I would send copies of his old returns with him showing the IRS withdrawl and have him take it to the new preparer and have her/him fix the current return.

You are too nice. As Matt said;I will let him sweat.

[Jesse]

I would send copies of his old returns with him showing the IRS withdrawl and have him take it to the new preparer and have her/him fix the current return.

I pointed this out to him when he came to my office - it is up to him whether he goes back to the current preparer with questions - my thoughts are that he is not going to do this because he is more concerned with the bottom line of his 2005 tax return and the extra $527 he's getting back because he "found" someone who knows what they are doing!?! If a CP notice is issued - he can take it to his new found friend.