For years, the federal government has offered a tax credit to encourage lower-income workers to save for retirement.

It was not a bad idea on paper. The problem was that many of the people it was designed to help owed little or nothing in federal income taxes. A nonrefundable credit does not do much for someone who has no tax bill to reduce.

Congress decided to replace it. The new program, Saver’s Match, works differently, and the IRS has started reaching out to taxpayers who might benefit when it launches.

Why the IRS is mailing retirement notices right now

The agency mailed CP321J notices to taxpayers who either claimed the existing saver’s credit on their 2025 tax returns or whose income that year fell within the potential eligibility range for the new program, CNBC reported.

The notices are not a confirmation of eligibility. They are a heads-up that the program exists and that the recipient may qualify once it takes effect.

The IRS has not said how many notices it sent. Taxpayers who receive one still need to meet the program’s income, age, filing-status and retirement-contribution requirements when the benefit becomes available for the 2027 tax year.

Read more retirement news on TheStreet.

How the government will deposit money into your retirement account

The program was authorized under the 2022 Secure 2.0 retirement legislation and will replace the existing saver’s credit after the 2026 tax year.

The mechanics are straightforward. The government matches 50% of qualifying retirement contributions, up to $2,000 in contributions per eligible person. That produces a maximum federal contribution of $1,000 for a qualifying single filer.

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For married couples filing jointly where both spouses meet the eligibility requirements, the match doubles. A couple in which each spouse contributes $2,000 to a qualifying retirement account could receive a total of $2,000 from the government.

Contributions can be made through a workplace plan such as a 401(k) or through an individual retirement account. Eligible taxpayers will claim the benefit on a new form, Form 8880-A, when filing their 2027 returns in 2028.

Other eligibility requirements include being at least 18 years old, not being enrolled as a full-time student, not being claimed as a dependent on someone else’s return and being a U.S. resident for tax purposes.

How much you can earn and still qualify

Single filers with modified adjusted gross income of up to $20,500 can qualify for the full match.

The benefit does not cut off sharply after that. Single filers with income between $20,501 and $35,499 remain eligible for a partial match. Above $35,499, single filers do not qualify.

For married couples filing jointly, the full match is available with income up to $41,000. Partial eligibility extends through $70,999. The income ranges listed in the IRS guidance are subject to the final rules governing the program before it launches.

Why the old program failed the people it was meant to help

The existing saver’s credit can reduce a taxpayer’s federal income tax bill by up to $1,000 for single filers and $2,000 for joint filers.

But because the credit is nonrefundable, it can only bring a tax liability down to zero. Taxpayers who owe less than the credit is worth lose the remainder. For households with very low incomes, that often means collecting far less than the stated maximum.

The Saver’s Match sidesteps that problem entirely. Rather than reducing a tax bill, the government deposits money directly into the taxpayer’s retirement account. The benefit does not depend on how much the person owes in taxes.

Stephen Roll, assistant professor at Washington University in St. Louis’ Brown School and research director at its Center for Social Development, said the structural change could reach more households than the credit it replaces, according to CNBC.

Many people in the target income range owe little or no federal income tax, which means the current credit often delivers far less than advertised. A direct deposit into a retirement account gets around that gap.

The catch that could leave Roth IRA savers empty-handed

Roth IRA contributions count toward determining eligibility for the Saver’s Match. But the government cannot deposit the match directly into a Roth IRA under the current framework. Taxpayers who save exclusively in a Roth account may need to open a traditional IRA or another qualifying account to receive the federal money.

The Treasury Department and IRS are considering a workaround. Under one proposal, a traditional IRA could serve as a conduit account, receiving the match first before the funds transfer into a Roth. That transfer would generally be treated as a taxable Roth conversion.

The agencies are accepting public comments on the proposal through Oct. 5.

Most plan administrators say they will not accept the deposits

Workplace retirement plans and IRA providers are not required to accept Saver’s Match deposits. The Plan Sponsor Council of America surveyed 125 plan administrators and found that only three said they would accept the federal contributions.

Forty-five were still weighing the decision. Fifty-seven said they would not participate. Twenty were not familiar with the program at all.

If plan providers do not sign up, eligible workers may need to find a separate account or take additional steps to collect the match. The federal government is planning to launch a website, TrumpIRA.gov, on Jan. 1 to help workers compare and enroll in IRAs and, where eligible, claim the Saver’s Match.

Taxpayers who received a CP321J notice should treat it as a prompt to review their retirement accounts, not as confirmation that the benefit is guaranteed.

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