Timely Tax Tidbits

Tax Reminder: Report Retirement System Contributions on Your Kansas Income Tax Return

The amount you contribute each year from your salary to the Retirement System is subject to Kansas income tax. Your contributions are deducted from your pay on a pre-tax basis for federal income tax purposes. Because of this, you need to make a specific entry on your Kansas income tax return. All KPERS, KP&F and Retirement System for Judges members are included.

You can calculate the amount of your contributions from your W-2 form. Some employers will provide this amount for you in Box 14 (labeled KPER). See the “Schedule S Line-by-Line Instructions” in the Kansas Income Tax Booklet for more information or contact the Kansas Department of Revenue.

• E-mail: tac@kdor.state.ks.us
• In Topeka: 785-368-8222

Get a Federal Tax Credit for Your Retirement Savings

Saving for retirement has an added bonus: it can also help you save on taxes. For low- and moderate-income taxpayers, the Savers’ Credit provides a tax credit of up to $1,000 ($2,000 if filing jointly) if you:

• Contributed to an eligible retirement plan such as a traditional or Roth IRA, 403(b) or governmental 457.
• Purchased service credit by making voluntary after-tax contributions to KPERS.

To qualify for the credit, your adjusted gross income on your 2008 federal tax return cannot be more than:

• $53,000, if married filing jointly
• $39,750 if head of household
• $26,500 if single or married filing separately

To calculate the credit, download IRS Form 8880, Credit for Qualified Retirement Savings Contributions, at www.irs.gov. A qualified tax advisor can help you determine if you qualify for the credit.

Split Your Tax Refund to Boost IRA Contributions

Did you know that when you choose direct deposit, the IRS can split your tax refund into up to three accounts? This is a great option if you want to save all or part of your refund in a traditional or Roth IRA, among other account options. By splitting your refund, you get the convenience of directing some of your refund to your checking account for immediate needs and sending some to savings for future use. You can designate a direct deposit to one account directly on the Form 1040 series of forms or you can use Form 8888, Direct Deposit of Refund to More Than One Account, to split your refund among two or three different accounts.

Tax Strategies Can Help Boost Your 457/403b Retirement Savings

If you receive a large tax refund, consider decreasing your tax withholding this year and start putting the extra into a retirement savings plan like the Kansas Public Employees’ Deferred Compensation Plan, or a 403(b) plan if you work for a school. If you’re like most people, you probably have too much withheld from your paycheck. In fact, the Internal Revenue Service estimates the average individual tax refund last year was about $2,371. While it’s nice to get a hefty tax refund each year, your money can’t work for you if someone else – the federal government – is holding onto it.

If you owe taxes, increasing your retirement savings (within certain limits) can reduce your taxable income. Not only will you boost your retirement savings, you may help lower your tax bill next year.

Estimate your tax withholding with the IRS withholding calculator at www.irs.gov/individuals/index.html. You’ll need a recent pay stub and your most recent tax return. Use the results to complete a new Form W-4 to submit to your employer. At the same time, be sure to start or increase your contributions to your retirement savings plan at work and watch your “tax” dollars go to work for you. Even small amounts, saved over time, can make a big difference.