IRA Rules

Below is an article that I found on IRA rules that gives good information.

Make no mistake about it: The IRA is America's savings vehicle of choice. In 2007, assets in such accounts totaled $4.75 trillion, more than any other type of retirement account, according to an Employee Benefit Research Institute study published Wednesday. That's the good news.

The bad news is that most Americans still don't have a clue about IRAs, even though they've been available for more than 25 years. Most Americans -- even those who don't have access to a 401(k) plan at work -- don't contribute to an IRA.

Just 10% of eligible taxpayers contributed to IRAs each year from 2000 to 2004, according to EBRI. And much of the growth in IRAs comes from rollovers (when a worker leaves his employer and transfers his 401(k) to an IRA) rather than new contributions.
So, it would appear that Americans still have much to learn about IRAs. Here are the best features - and least-known facts -- about IRAs, according to the experts:

The Nondeductible IRA
Here's one fact many people don't realize: Everyone under the age of 70-1/2 who either has earned income or is married to someone with earned income is eligible to contribute to a traditional IRA, said Barry Picker, author of "Barry Picker's Guide to Retirement Distribution Planning" and a principal with Picker, Weinberg & Auerbach, CPAs.
"Too many people confuse inability to deduct the contribution with the perceived inability to make a contribution," he said.
There are several kinds of IRAs, including traditional, Roth and SEP. And there are two kinds of traditional IRAs: deductible and nondeductible. Taxpayers whose adjusted gross income is above certain thresholds and who have an employer-sponsored retirement plan typically can't deduct their contribution to an IRA.
"For traditional IRAs, the income limits only affect whether your contribution is deductible," said Michael Kitces, editor of the Kitces Report. "There is no upper limit on income that would prevent you from being able to make at least a nondeductible contribution to an IRA, as long as you have the minimum amount of earned income."
To be sure, nondeductible IRAs have some disadvantages. There's paperwork. Nondeductible IRA owners have to file Form 8606 every year with their tax return. And there's a bit of tax work required come distribution time. Owners of nondeductible IRAs must calculate the taxable vs. the nontaxable portion of their distributions when that time comes. Plus, there's some number crunching required. One should examine whether investing in certain securities (those that produce capital gains) inside a taxable account is better at building after-tax wealth than a non-deductible IRA.
Still, those costs don't seem to outweigh one of the chief benefits of any type of IRA. And that, according to Kitces, is the power of tax-deferred compounding over long periods of time.
Read IRS Publication 590 for the rules regarding nondeductible IRAs. Of note, those who save for retirement using a nondeductible IRA will have to file Form 8606 with their tax return each year. See Publication 590 on IRS site. See Form 8806.

Tapping IRAs
Many IRA owners assume they have to wait a long time until they can get at the money in their IRA. Not so, say Kitces.
One can start taking money out of IRAs before age 59-1/2 by using the substantially equal periodic payments (SEPP) rules or what some call the 72(t) rules. It's complicated, but IRA owners can withdraw a fixed amount of money for a minimum of five years or to age 59-1/2, whichever comes last. Owners have to pay ordinary income tax on the distribution, but they don't have to pay the early distribution penalty. Learn more about SEPP rules here.
Also, Kitces says, few Americans are aware of their ability to tap IRAs without penalty for medical and educational expenses. Yes, such distribution are only allowed under certain conditions (when medical expenses exceed 7.5% of adjusted gross income, for instance), but many savers are not aware it's even an option, he said.
Beneficiary Form Problems
For those that already own (or may soon own) an IRA, Beverly DeVeny, an IRA technical consultant with Ed Slott & Company, says beneficiary form problems rank high on her list of least-known facts. The beneficiary form details who will receive the IRA when the account owner dies. In many cases, account owners fail to change the names of their beneficiaries after a divorce, death or birth.
"Just make sure there is a form on file and that it names the beneficiary that you want to inherit the account," she said. "Without a form, the account will likely go to your estate and be taxable." Or, the account could go to an ex-spouse or some other unintended person. Also, she suggested IRA owners need to look at the distribution options that will be available to their beneficiaries and make sure that they offer the flexibility that they want for their beneficiaries.
Rollover Problems
Also, DeVeny said, IRA account owners need to follow-up diligently on any transfers they make to be sure they get into the correct accounts. "Don't rely on anyone else to do this for you," she said. Likewise, IRA account owners need to be sure that rollovers are back into an IRA account within the 60-day timeframe. And finally, they need to know that they can do only one rollover every 365 days per IRA. Although the same IRA can receive more than one rollover, once it has received a rollover it cannot then distribute funds for rollover until the 365 days have passed.
Inherited IRAs
Beneficiaries need to know that the name of the decedent must always remain in the title of an inherited account and that the funds can move only in a trustee-to-trustee transfer, DeVeny said. "It is important for beneficiaries to know this because too many advisers and companies do not know it," she said. A distribution paid to the beneficiary or transferred into an account in the beneficiary's name is taxable to the beneficiary and there is no way to undo the transaction, she said.

Not to Late for a 2007 IRA

It is very important to know the last date that to contribute to an IRA and the maximum amount. You can contribute until April 15th of the following year. The amount for 2008 is $5,000 or $6,000 depending upon your age during the year.

The following article does a good job of explaining details:

Ask the Expert: Not Too Late for a 2007 IRA by Walter Updegrave

Question: I'd like to reduce my tax liability for 2007. Can I still make a contribution to my 401(k) or to an IRA and have it count toward the 2007 tax year? Or is too late for me to do that now? --J. Scott

Answer: As far as your 401(k) is concerned, the answer is no. You can't make a contribution in 2008 and have it count as if you had made it last year. That said, now is an excellent time to reconsider the percentage of salary you're saving this year with an eye toward boosting it so that you don't find yourself scrambling again next year.
Fortunately for you, as well as other procrastinators out there, the story is different when it comes to an IRA. You can still stash up to $4,000 ($5,000 if you're 50 or older) in an IRA and have the contribution count toward the 2007 tax year, as long as you do so by the April 15th tax filing deadline. Just be sure that you make it clear to the brokerage firm, mutual fund company or bank you're dealing with that the contribution is for the 2007 tax year.
As long as you do that, you'll retain the option of also making a contribution for this tax year, which, by the way, can be even larger, since the ceiling for IRA contributions for the 2008 tax year is $5,000, plus an extra $1,000 catch-up contribution for anyone 50 or older.

The ABCs of IRAs

Given the way you've phrased your question, I assume that you're primarily interested in doing a traditional deductible IRA. And, hey, if the prospect of saving some bucks on your taxes is what it takes to get you to save more money for retirement, I'm jiggy with that.
But you might think about doing a Roth IRA instead. True, contributing to a Roth won't shave your tax tab this year. But there are several other advantages to a Roth, among them the fact that it effectively allows you to save more money as well as hedge your tax exposure in retirement.
Of course, all this talk about deciding between a traditional deductible IRA and a Roth, assumes that you're actually eligible to do either or both. In fact, that depends on a variety of factors, including your income and whether or not you're covered by a workplace plan (which you apparently are). If you're married, your spouse's income and access to retirement plans at work can also come into play.
One way to figure out if you're eligible for a traditional deductible or Roth IRA and, if so, how much you can contribute is to pore over IRS Publication 590: Individual Retirement Arrangements. Or you can cut to the chase and go to an online calculator like this one.

Deductible or nondeductible

By the way, if it turns out that you're not eligible for a deductible IRA or a Roth, you always have the option of doing a nondeductible IRA (assuming, that is, you have earned income). Until recently, I probably wouldn't even have brought up this option since I think most people can do as well or better by investing in tax-efficient mutual funds.
As the result of a tax law change in 2006, however, nondeductible IRAs can be a conduit for getting money into a Roth IRA (although you've got to wait until 2010 to actually make the transfer). In any case, if you're definitely boxed out of a traditional deductible IRA and a Roth IRA, you may want to consider contributing to a nondeductible IRA and later converting to a Roth. (For details on that maneuver, click here.)

Bottom line:

One way or another you should be able to contribute to an IRA. So don't put it off any longer. Get thee to a mutual fund company, a brokerage firm or even a bank before April 15th and fund that IRA. Come retirement time, you'll be glad you put the extra bucks away.Are you on track for an early retirement? Tell us why at millionaire@cnnmoney.com. Include your financial details and your family could be profiled in a future column of our Millionaire in the Making series.