Every year, I have been deducting $8,000 as a tax credit from my taxable income for a traditional IRA. I think it shows up as a retirement credit, max at $8,000 a year. Which worked out fine, I received a small refund each year and never have to pay any additional tax( I am in Washington state).
Our company gave us a small amount (less than $1,000 a year) as a retirement contribution. (I have never matched it) - I never pay attention to the count in this amount.(Tax program never asked)
Do I need to report this $1,000 amount? I use the FREE online Tax program, and it has never mentioned this in the past. What happens if I get an audit?
I’m not sure what you mean by deducting as a tax credit, but yes, deductions from pretax accounts like an ira or 403b are added to your income and raise your agi, thus resulting in a higher level that the 7.5 pct medical deduction must exceed before you can deduct expenses for them. This recently happened to me but the company withheld taxes before sending me the net. Unfortunately, they underwithheld for ca state tax so I had a hefty state tax bill due.
Example: Let’s say I made $80,000 a year, and I contribute to a traditional IRA. max $8,000 for tax year of 2025. So my taxable income is $80,000 - $8,000 (Max per year) - standard deduction.
My employer also contributes, say (403 contribution) 4% a year, to my retirement.
The question is, would there be any problem with NOT adding 4% to that IRA tax credit? (The max you can use to offset your income is $8,000. Would this trigger an audit?