I was advocating for my low income friend to shoot for the Saver's Credit the other day so he could pocket all of his EIC and it became apparent that parting with money until retirement is an unattractive option for someone making under 20k/year.
This got me thinking--is it legal to contribute to a Roth IRA for 2016, claim the Saver's Credit to wipe out your tax liability, and then withdraw your Roth contributions penalty and tax free after you receive your tax refund?
Or is there some required seasoning period that disallows an immediate withdrawal of your Roth contributions?
You would have to wait until at least April 18 this year, and possibly Oct. 16, depending on the interpretation of "due date of your 2016 return (including extensions)" - see the instructions for Line 4 on 2016 Form 8880
I don't know whether "including extensions" implies "that you have requested" or not.
Anyway, at worst you could withdraw your 2016 Roth contributions that were used for the 2016 saver's credit after Oct. 16, 2017 and pay no tax or penalty. You would then, however, be prevented from using up to that withdrawn amount toward the saver's credit in your 2017, 2018, and 2019 returns. Again, see line 4 of Form 8880.