In 2027, the IRS and also the Department of the Treasury will be launching a new initiative under SECURE 2.0 Act of 2022 known as Saver’s Match contributions, which is intended for increasing retirement savings for millions of low – to moderate-income Americans. The IRS has issued Notice 2024-65 in preparation asking the public for input on important elements of this program that will help it to effectively reach its target audience.
The following are among the vital questions that IRS is asking about the Saver’s Match contributions:
Defining eligibility for Saver’s Match contributions
One of the main questions of the IRS is on who will qualify for these new contributions. Under Saver’s Match program, individuals can get a matching contribution of up to $1,000 from the Treasury if they make annual contributions of as much as $2,000 into a 401(k)-type plan or Individual Retirement Account (IRA). However, this match phases out at certain income levels which are: for married couples filing jointly it is $71,000 and for single filers it is $35,500. IRS aims to know whether these income thresholds are ideal and if there are other qualifications that should be put into consideration before one can qualify for the match.
Clarifying the claim process
The IRS is also asking about taxpayer’s claims for their respective Saver’s Match contributions. Unlike the Saver’s Credit that is not a refundable tax credit, the contributions of Saver’s match will be paid directly by the treasury to a designated 401(k)-type plan or non-Roth IRA account. To streamline this process, the IRS has made a request for information from individual taxpayers on what they might provide as documentation or evidence of their savers’ match and how they are expected to receive these funds too. In addition, they are asking whether there should be any simple methods or automated processes that may ease the taxpayer’s burden during the claiming process.
Designating the account for contributions
One of the greatest concerns raised by the IRS is how individuals will designate their accounts to accept contributions of Saver’s Match. The IRS is seeking public opinion on whether or not there should be specific rules or limitations that apply to which kinds of accounts can receive such contributions. In addition, they are also interested in knowing what can be done to make sure taxpayers fully understand what their choices for account designation are, especially if they have no existing retirement account.
Managing early distributions and recovery taxes
In cases of early distributions from retirement accounts, the IRS is looking into how to manage Saver’s Match recovery taxes. Taxpayers who take out money early from their matched accounts may incur penalties or even recovery taxes. The IRS is currently seeking public feedback on what guidelines should be applied in such circumstances, the extent of the amount to be recovered as well as recognizing exceptions if any financial limitations or other conditions that should be considered.
Ensuring access for underserved communities
How to make the Saver’s Match program reachable by individuals living in places that are not served is a major concern to the IRS. They want to know how to make the public aware of this program, have all qualified applicants understand what procedure to adhere to while applying so that they can gain maximum benefits. Understanding the best outreach strategies or educational initiatives targeting low – to moderate-income taxpayers who do not normally use retirement savings plans is what the IRS needs.
Why is the IRS asking these questions
The IRS and Treasury are requesting input from various groups such as taxpayers, tax preparers, financial advisers, IRA custodians, retirement plan administrators among others who deal with various community organizations. The feedback obtained will facilitate successful implementation of the Saver’s Match aimed at improving retirement readiness among those who need it most across the U.S..
The IRS expects that by asking for this advice at this point in time, they will develop a scheme that is quite explicit, open to all and will be of great help to a lot of Americans within a short period of time.
For more information, visit the IRS website.
