Traditional IRA ownership can add a new wrinkle to prepping your income tax return. Because contributions are tax-deductible, you have to report them when you file. If you happen to file before you make your IRA contribution, don't stress. The situation can be remedied.
IRA Contribution Deadline
For any IRA -- traditional or Roth -- the deadline for making contributions, as well as for opening an account, is the tax-filing deadline for that year, usually April 15. So, if you want to deduct contributions for tax year 2012, you have to put the money in the account by April 15, 2013.
Should you happen to file your taxes well before April 15, in February, for example, and later elect to make an IRA contribution, there is hope. You or your accountant can file an amended return -- Form 1040X for most filers -- that does include the IRA contribution. Just to be clear, adding the amount of the contribution to your return means recalculating your modified adjusted gross income and adjusting the amount of your tax or refund accordingly.
Yearly Contribution Limit
The yearly IRA contribution limit applies to each owner-taxpayer. No matter how many IRA accounts you own -- traditional or Roth -- your limit for the year is $5,000 as of 2012, $6,000 if you are age 50 or older. If you own a total of 10 accounts, the sum of your contributions for each tax year cannot exceed $5,000.
Rollover contributions to a traditional IRA must also be reported on your tax return. Converting from a pretax employer-sponsored account or traditional IRA to a Roth is a taxable event; rollover amounts are included in income and taxed at your ordinary income tax rate for that year. The IRS does not require that you report regular Roth IRA contributions on your return because you cannot deduct Roth contributions. Your trustee files paperwork to keep the IRS apprised of your Roth IRA activity.