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Filing taxes is a confusing and complex process get started with individuals. Making errors will happen from a person to time, but the one thing you would not want to do is understate the income you make. Underreporting earnings is means to get the IRS hopping mad.

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Contributing a deductible $1,000 will lower the taxable income from the $30,000 1 year person from $20,650 to $19,650 and save taxes of $150 (=15% of $1000). For your $100,000 per year person, his taxable income decreases from $90,650 to $89,650 and saves him $280 (=28% of $1000) - almost double the amount!

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