Even though you may be on vacation, the IRS is always at work thinking about taxes!

August and the “Dog Days of Summer” are upon us. Taxes are probably the furthest thing from your mind. But now, months before the end of the year and the start of tax season, is a good time to takes steps to lower your tax bill for 2008.

Take the “Saver’s Credit” for example.

One way for low and moderate income Americans to save on taxes is by saving for retirement. If you make voluntary contributions to an employer-sponsored retirement plan or to an individual retirement arrangement, you may be able to take a tax credit.

Formally known as the “Retirement Savings Contributions Credit,” the Saver’s Credit applies to:

• Married individuals filing separately and single with incomes up to $26,500 for 2008
• Married couples, filing jointly, with incomes up to $53,000 for 2008
• Head of Household with incomes up to $39,750 for 2008

To be eligible for the credit you must be at least age 18, not be a full-time student, and cannot be claimed as a dependent on another person’s return. You may be able to take a credit of up to $1,000 (up to $2,000 if filing jointly) if you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans. The amount of the credit is determined by your filing status, your adjusted gross income, and your other retirement contributions.

The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.

When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies for distributions starting two years before the year the credit is claimed and ending with the filing deadline for that tax return.

 The Savers Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.

 For more information, review IRS Publication 590, Individual Retirement Arrangements and Form 8880, Credit for Qualified Retirement Savings Contributions which include the instructions. The publication and form can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.